HF 1239 
,K3 




(Eimtmerrtal Uattt 

Mat %u&iM&& Mm 












Illlillll 

AMERICAN BUSINESS MAN 
SPECIAL EDITION 

■I 




is !i 




it in mi i m fl u t tUt m 




Glass— _Jlr l S. 3 ^ 

Book ,M 3 

CoBTiglitN 



COPYRIGHT DEPOSfT. 



BUSINESS LAW 



A READY REFERENCE 
DESK MANUAL 



This boolc tells a thousand points of law that every 
business man- needs to know — points which are com- 
monly unknown until after the damage has been done 
and a loss incurred. It is a complete ready reference 
desk manual containing an exhaustive subject index. A 
partial list of the contents will show at a glance the 
money value of this comprehensive book to any business 
man, be he employer, large or srriall — be he employee, in 
no matter what position. 



n 






PUBLISHED BY 

AMERICAN BUSINESS MAN PUBLISHING CO. 

FISHER BUILDING 

CHICAGO, ILL. 






LIBRARY of CONGRESS 
I *o CtDies rtece»»rf 

MAY 22.V908 
hv,3& A- xxc. «■-. 

I COPY B. 



Copyright, 1908, 
AMEBICAN BUSINESS MAN PUBLISHING CO. 



CONTENTS. 

Page 

Contracts — Definition — Classification 5 

Elements of Contracts 6 

Joint and Several Contracts 8 

Subject Matter 10 

Consideration 11 

Illegality 13 

Conditions 14 

Formalities 15 

Ratification 17 

Breach 18 

Partnership 20 

What Constitutes a Partnership 20 

Kinds of Partnerships 23 

Formation of Partnerships ^ 25 

Partnership Property 27 

Powers and Rights bf Partners 29 

Duties and Liabilities of Partners 32 

Dissolution 33 

Winding Up and Distribution 35 

CORPORATIUNS 30 

Powers and Liabilities of Corporations 39 

Liability for Torts 40 

Taxation of Corporations 41 

Consolidation of Corporations 41 

By-Laws of a Corporation 42 

Directors 45 

Dissolution of Corporations 50 

Coataiercial Paper 52 

Bills of Exchange and Promissory Notes 55 

Requisites of Bills and Notes 58 

Manner of Execution 62 

Negotiability and Manner of Transfer 63 

Restrictions Upon the Right of Making Bills and Notes 64 

Execution or Transfer 66 

Consideration 66 

Acceptance of Bills of Exchange 68 

Indorsement 70 

Maturity 71 

Demand „ 72 

Protest 73 

Checks ' 75 

Principal and Agent 78 

Class of Agents 79 

General and Soecial Agents 80 

Duties of Agents 83 

Signatures by Agents 86 

Duties of Principal as to Agents 88 

Liability of Agents to Third Parties 91 

Rights of Agents Against Third Parties 91 

Notice to Agent Is Notice to Principal 92 

Rights of Principals Against Third Parties 93 

Rights of Agent Against Principal 93 

Ratification 93 

Insurance 97 

Warranties 98 

Representations 99 

Concealment 100 

Premium . . . ^ „ 101 

Insurable Interests 103 

Insurance Agents = . . . 105 



4 CONTENTS. 

Waiver P ^ 

Reinsurance 107 

Bailment ; -j 09 

Kinds of Bailment '.'."' " ' mo 

Lien ; ; ; ; ; i"o 

Contract ' m 

Negligence : Burden of Proof 113 

Action by Bailer Against Third Person 114 

Bailee Against Third Party 114 

Bailee vs. Bailor 114 

Common Carriers — Carriers of Passengers 116 

When the Relation Begins and Ends . '. .'. us 

Contributory Negligence ' ' 119 

Consignment to Carrier ' . [ 121 

Notices Limiting Liability '. 103 

Carrier's Liability During Transit '..'. 124 

Stoppage in Transitu .' 125 

Connecting Carriers * ' 126 

Carrier's Liability as Warehouseman . ........... 127 

Measure of Damages '.'.'.'. 129 

Property — Real Property . ......'.'.....'. 131 

Definition — Real Things 131 

Personal Property — Definition [ .[ 132 

Kinds of Personal Property '.'.'.'.'. 132 

Mortgages — Definition ' " " .' 134 

Mortgageable Property ' ' 135 

When Mortgages Are Invalid ' ' ' 135 

Construction and Effect of Mortgages. 135 

Insurance of Mortgaged Property 136 

Equity of Redemption 137 

Conveyance of Mortgaged Land ......'. 137 

Assignment of Mortgages 138 

Tender and Payment 138 

Release and Discharge [ .'. 138 

Landlord and Tenant — Definition 138 

Rights and Liabilities of Landlord 140 

Rights, Duties and Liabilities of Tenant 140 

Repairs 141 

Rent \\\ i4i 

Eviction \\\ 142 

Surrender 142 

Forfeiture 142 

Landlord's Possessory Remedies 143 

Insolvency and Bankruptcy — Definition 144 

Bankruptcy Law 144 

Who May Apply for Adjudication 144 

Inventory and Schedule 145 

Hearing and Determination 145 

Who May Be Adjudged Bankrupts or Insolvents 145 

Acts of Bankruptcy or Insolvency 146 

Debts and Claims Against Estate ]46 

Assignee or Trustee 147 

Compositions 148 

Discharge of the Debtor . . . . . 148 

Collateral Notes 150 

Judgment Notes — Form 151 

Power of Attorney — Form 152 

Warranty Deed — Long Form 153 

Warranty Deed — Short Statutorv Form 156 

Quit Claim Deed — Short Statutory Form 156 

Lease — Short Form 158 

Principal Trust Deed Note 161 

Interest Coupon Note — Form ' 161 

Trust Deed — Short Form 161 

Chattel Mortgage Note — Form 165 

Chattel Mortgage — Short Form 165 



CONTRACTS. 

Definition. A contract is an agreement upon a 
sufficient consideration to do or not to do a par- 
ticular thing. 

Classification. The principal classifications of 
contracts are : first, express contracts and implied 
contracts; second, executed and executory con- 
tracts. 

An express contract is one the terms of whick 
are declared by the parties at the time they enter 
into it. 

An implied contract may be one of fact, where, 
in the absence of a formal contract, a mutual 
intention to contract is shown by the acts of the 
parties or by surrounding circumstances; or one 
implied in law, that is, obligations imposed by 
law without regard to the intention of the parties, 
or even contrary to their intentions, for the pur- 
pose of enforcing legal duties by actions ex con- 
tractu. 

Express contracts are divided into contracts 
under seal, or specialties, and contracts in parol. 
The seal has lost much of its importance through 

5 



6 COMMERCIAL LAW 

statutory changes made in the common law. In 
many states the distinction between sealed and 
unsealed instruments has been done away with. 

Parol or simple contracts need not be under 
seal, and,, unlike contracts under seal, require a 
consideration to support them. 

An executory contract is one in which a party 
binds himself to do or not to do a particular thing. 
An executed contract is one in which the object 
of the contract is performed. 

Elements of Contracts. The essential elements 
of contracts are the existence of two or more 
contracting parties, a meeting of their minds by 
which each gives his voluntary assent to the thing 
agreed upon, and an obligation, either created or 
dissolved, which constitutes the subject matter of 
the undertaking. 

Parties. The parties must be capable of con- 
tracting at the time they enter into the obliga- 
tion; without the capacity to contract there can 
be no assent and no obligation. 

(1) Insanity. The party to be bound by the 
contract must be able to understand its nature 
before he can bind himself by it. He must be 
of sound mind, and proof of insanity avoids a 
contract. 

(2) Infants. The general rule is that the con- 
tracts of infants are voidable. Every person is 
in law an infant until he becomes of age. In 
nearly all the states this is regulated by statute, 



COMMERCIAL LAW 7 

and in most states males become of age at twenty- 
one and females at eighteen. An exception exists 
with regard to contracts for necessaries. The 
obligation of the infant to pay for necessaries 
furnished him is one imposed by law rather than 
one which arises from his contract. Whether an 
article is a necessary or not depends upon its 
general character. Articles of mere luxury or 
convenience are always excluded. As a general 
rule, such things as food, clothing, lodging, and 
the like, or instruction suitable and requisite for 
the proper development of the mind are consid- 
ered necessaries. An infant, on reaching his ma- 
jority, may ratify contracts which would other- 
wise be voidable. No new consideration is neces- 
sary to support the ratification, the antecedent ob- 
ligation being sufficient. 

(3) Married Women. At the common law the 
legal existence of a married woman is considered, 
except in certain special cases, as merged in that 
of her husband; her contracts are, therefore, ab- 
solutely void. The rule of the common law has 
been changed in most states by statutes, especially 
with regard to a married woman's power to con- 
tract with reference to her separate property. 

(4) Agents and Corporations. The validity 
of the contracts of corporations depends upon the 
express or implied powers of the corporations,, 
and, as all their contracts must be made by agents, 
upon the authority vested in the agent through 



8 COMMERCIAL LAW 

whom the contract is made and the manner in 
which the contract is executed. 

Joint and Several Contracts. A contract which 
imposes an obligation in its entirety on two or 
more persons on the one hand, or confers a right 
upon two or more upon the other hand, is a joint 
contract. If the obligation so imposed rests in its 
entirety upon each of the persons so bound on 
the one hand, or the right so given is complete 
and indivisible in each of the persons on the other 
hand, in whose favor the contract runs, the con- 
tract is several. 

Privity. Privity of contract is the relation 
which subsists between the immediate parties to 
the contract. As a general rule, privity is neces- 
sary to enable a person to enforce a contract. 

The right of a third person to sue on a con- 
tract made for his benefit between others, to the 
consideration of which he is a stranger, is a sub- 
ject of great conflict in the authorities of the dif- 
ferent states. The rule adopted in most of the 
states is that where one person makes a promise 
to another for the benefit of a third person, that 
third person may maintain an action on such 
promise. 

Assent. The free mutual assent of the parties 
is necessary to constitute a contract. Assent may 
be presumed, and affixing a signature to a con- 
tract creates a conclusive presumption, in the ab- 
sence of fraud, that the signer read, understood 



COMMERCIAL LAW 9 

and assented to it. The same presumption arises 
with almost equal force as to one who executes 
a contract by accepting the instrument tendered 
by the other party, his own signature being un- 
necessary. An instance is the acceptance of a 
shipping contract or bill of lading. Assent neces- 
sarily implies a meeting of the minds of all the 
contracting parties, a coming together upon the 
common ground of a mutual understanding of 
facts and of subject-matter. 

Subject-matter. The subject-matter of a con- 
tract comprehends the consideration passing from 
one party to the other and the obligation which 
this consideration creates. 

Continued Existence of Thing Contracted For. 
Where the thing which is the subject of negotia- 
tion turns out to have no existence, present or 
potential, or to have ceased to exist before the 
agreement is completed, and the parties are ig- 
norant of the fact, no obligation is created, for 
this situation is only possible when there has been 
a mutual mistake of fact; and a mutual mistake 
about a matter of- fact avoids the contract. The 
subject of the contract need not have an actual 
existence at the time ; it may have a potential ex- 
istence merely. 

The subject-matter of the agreement must be 
expressed by the parties in such terms that it 
can be ascertained to a reasonable degree of cer- 
tainty. 



10 COMMERCIAL LAW 

Consideration. Consideration is defined as a 
benefit to the party promising or a loss or detri- 
ment to the party to whom the promise is made. 
At common law every contract not under seal re- 
quires a consideration to support it. Considera- 
tion need not be a thing of pecuniary value, or 
even reducible to a money value. 

A consideration is good, such as that of blood, 
or of natural love and affection, where a man 
grants an estate to a near relation being founded 
on motives of generosity and natural duty ; a val- 
uable consideration is the benefit or detriment 
just defined. A promise founded on a good con- 
sideration is gratuitous and unenforceable. 

The consideration for a promise may be exe- 
cuted or executory. An executed consideration 
is some act performed or some value given at 
the time of making the promise and in return for 
the promise then made. An agreement upon an 
executed consideration arises where one of the 
parties has, in the act which amounts to an offer 
or an acceptance, as the case may be, done all 
that he is bound to do under the agreement, leav- 
ing an outstanding liability on the other side only. 
An executory consideration is a promise to do or 
to give something, or to forbear from doing some- 
thing in return for some other promise or thing- 
done. 

The consideration must not be illegal, either 



COMMERCIAL LAW 11 

because it is in violation of a statute, or because 
it is immoral or contrary to public policy. 

If the consideration is obviously and on the face 
of the contract impossible, it is no consideration 
and will not support an agreement. 

A promise to do what the promisor is already 
bound to do cannot be a consideration, for if the 
person gets nothing in return for his promise but 
that to which he is already legally entitled, the 
consideration is unreal. 

By the weight of authority a past considera- 
tion, if it imposed no legal obligation at the time 
it was furnished, will support no promise what- 
ever. A past consideration, it is said, is some 
act or forbearance in time past by which a man 
has benefited without thereby incurring any legal 
liability. 

So long as it is something of real value in the 
eye of the law, whether or not the consideration 
is adequate to the promise, is generally imma- 
terial. The slightest consideration is sufficient to 
support the most onerous obligation; the inade- 
quacy is for the parties to consider at the time 
of making the agreement, and not for the court 
when it is sought to be enforced. 

Illegality. An illegal agreement will not be en- 
forced, and hence is not a contract according to 
the definition of a contract. The illegality may 
be found in the matter of the consideration or of 
the promise as expressed in the agreement, or it 



12 COMMERCIAL LAW 

may be found in the purpose to which the agree- 
ment, although legal in expression, is applied. In 
either case the agreement is void. 

Unlawful agreements, that is, those whose ob- 
jects are illegal, may be placed in two classes, viz. : 
(1) agreements in violation of positive law, (2) 
and agreements contrary to public policy. In the 
first of these classes the object of the agreement 
is expressly or impliedly prohibited by some rule 
of the common law or by express statute. In the 
second the prohibition rests on what is called the 
" policy of the law," or public policy. The com- 
mon law prohibits generally what is contrary to 
public policy and morality as defined by the 
courts. An agreement which involves the doing of 
anything which is a crime or an indictable offense 
at common law is illegal and void. An agree- 
ment with an alien enemy is illegal and void. 
Agreements involving a civil wrong against a 
third party are void. Agreements to perpetrate 
a fraud upon a third person, agreements which 
are intended or directly tend to defraud the public 
generally, agreements to defraud creditors, are 
void. Where a statute expressly declares that 
certain kinds of contracts shall be void, there is 
then no doubt of the legislative intention, and an 
agreement of the kind made void by the statute is 
unlawful. The same is true where the contract is 
in violation of a statute, although not therein 
expressly declared to be void. 



COMMERCIAL LAW 13 

Instances of contracts void as being contrary to 
public policy are, an agreement to influence legis- 
lation, an agreement to influence an appointment 
to an office, agreements whose tendency is to es- 
tablish a monopoly, agreements tending to inter- 
fere with the administration of the government. 

An agreement in unreasonable restraint of trade 
is illegal and void, but an agreement in reason- 
able restraint of trade is valid. What is a reason- 
able restraint of trade depends upon the circum- 
stances of the particular case. 

Conditions. A conditional contract is an execu- 
tory agreement, the performance of which de- 
pends upon a condition. It is not an executory 
contract, since an executory contract may be an 
absolute agreement to do or not to do something ; 
but it is a contract whose very existence depends 
upon a contingency or condition. 

A condition which must be performed before 
the agreement of the parties becomes a valid and 
binding contract is called a condition precedent. 
Strict performance of conditions precedent is re- 
quired, and the fact that performance of the con- 
dition has been rendered impossible, for any cause 
except the act of the obligee or the act of God, 
will not release the party bound thereby from his 
obligation to perform it. Failure to perform a 
condition precedent is a breach of contract. 

Where the conditions of a contract are such 
that the parties must perform their promises at 



14 COMMERCIAL LAW 

the same time, they are known as conditions con- 
current. Neither party is bonnd to do the first 
act, bnt each must be able and ready to perform 
his own, and the one who is ready and able to 
perform has a right of aetion against the one who 
is not. If the obligations of the parties are mu- 
tual and dependent, then the refusal of one to 
perform without sufficient excuse is equivalent to 
an abandonment of the contract and releases the 
other from any duty to further recognize its ob- 
ligations. 

A condition subsequent is defined to be one 
which enlarges or defeats an estate or right al- 
ready created. The use of the term is confined 
almost altogether to estates in land. 

Eights created by conditional contracts may 
be waived by acts or speech on the part of the 
obligee which indicate an evident intention to re- 
lease the obligor from the performance of the 
condition. 

Formation and Execution. Contractual rela- 
tions are instituted in two ways, by the express 
act of the parties and by operation of law. The 
parties may make their contract by express agree- 
ment or by such conduct as implies a meeting of 
the minds with intent to contract and so creates 
and implied contract. 

All express executory contracts resolve them- 
selves into an offer by one of the parties and an 
acceptance of that offer by the other. The act 



COMMERCIAL LAW 15 

of acceptance closes the contract, and ordinarily 
nothing farther is required to make the obliga- 
tions effective. No especial formalities are re- 
quired. Offer and acceptance may be made by 
letter or by telegraph or by word of mouth. If 
they constitute a meeting of the minds and create 
a mutual obligation, they form as valid a contract 
as if they were couched in the most formal phrase- 
ology. The offer, in whatever form it is made, 
does not bind the one who makes it until the one 
to whom it is made accepts it. It is deemed to 
continue in force until it has been answered or 
withdrawn. If the acceptance is conditional, no 
assent is attributable to the proposing party, nor 
can any contract subsist until the conditions thus 
suggested have been assented to by the one who 
made the offer. 

An implied contract, in the proper sense, is 
where the intention of the parties is not expressed, 
but an agreement in fact, creating an obligation, 
is implied or presumed from their acts, as in the 
case where a person performs services for an- 
other, who accepts the same, the services not 
being performed under such circumstances as io 
show that they were intended to be gratuitous, 
or where a person performs services for another 
on request. 

Formalities Attending Execution. The extent 
to which the law permits a contract to rest in 
parol is governed in large measure by the statute 



16 COMMERCIAL LAW 

of frauds. This statute was enacted in the reign 
of Charles II, in 1676, and has been substantially 
re-enacted in all the states. It provides that no 
action shall be brought to charge any person upon 
any of the following agreements, unless the agree- 
ment or some memorandum or note thereof should 
be in writing and signed by the party to be 
charged therewith or by some person duly author- 
ized by him: 

(1) Agreements in consideration of marriage. 

(2) Promises by executors and administrators 
to pay damages out of their own estate. 

(3) Promises to answer for the debt, default 
or miscarriage of another. 

(4) Agreements not to be performed within 
the space of a year. 

(5) All agreements pertaining to real prop- 
erty and estates and interests therein. 

(6) All cases of the sale of goods of the value 
of $50 or more, unless the buyer shall accept part 
of the goods so sold, or give something in earnest 
to bind the bargain or m part payment. 

The memorandum in writing need not formally 
recite its purpose as a note of the agreement; 
any memorandum, however informal, is adequate 
if it states the 'agreement with sufficient clearness. 
The memorandum of a land contract need not be 
under seaL In the absence of statutory provision 
to the contrary, the memorandum of the contract 



COMMERCIAL LAW 17 

required may be made subsequently to the mak- 
ing of the contract itself. 

Signature. Subject to statutory requirement, 
a written instrument does not requix'e the signa- 
ture of all the parties to it. Without signing a 
contract one may become bound by it if he rec- 
ognizes and adopts its stipulations. The signa- 
ture need not be put at the end of the writing, 
but may be written in any portion of the contract. 
Signing with the initials or only the Christian 
name is sufficient. 

Ratification. Contracts that have been made 
by one acting in the capacity of an agent, with- 
out the authority of his principal, and those that 
have failed to become operative by reason of some 
inherent vice may be made binding by ratification. 
Contracts tainted with fraud, or signed under 
duress, or in a state of intoxication, may be rati- 
fied. A material alteration may be ratified. Eati- 
fication may be express, or it may arise by im- 
plication. 

Methods of Discharge. It is entirely compe- 
tent for the parties to a contract to discharge or 
annul the same by mutual agreement to that ef- 
fect. 

A material alteration of a written instrument 
may, under certain circumstances, invalidate the 
instrument so that no recovery may be had on its 
executory provisions in either its altered or orig- 
inal form. 



18 COMMERCIAL LAW 

Oral agreements between the parties to a writ- 
ten contract, made before or at the time of the 
contract, are merged therein. 

Where the performance of one's duties by the 
terms of the contract is made a condition pre- 
cedent, either expressly or by implication, he can 
only recover by proving that he has faithfully 
discharged those duties or that the other party 
has waived the performance of them. It is a 
general rule that, where performance is required, 
the law is satisfied with a substantial perform- 
ance. 

Executory agreements ordinarily are made on 
the implied condition that the performance of the 
agreement shall not be rendered impossible by 
the intervention of some accidental and uncon- 
trollable superior agency. In common law this 
agency is termed an act of God and its interven- 
tion may excuse performance. 

Breach. A breach of contract may arise in any 
one of three ways, namely: by renunciation of 
liability under the contract; by failure to per- 
form the engagement, or by something which ren- 
ders the performance impossible. 

The effect of a breach upon the rights, reme- 
dies and liabilities of the contractors depends 
upon the nature of the agreement. If the con- 
tract is entire, a breach as to a single material 
point discharges the whole, relieving the other 
party from performance and affording him an 



COMMERCIAL LAW 19 

immediate right of action to enforce the whole 
obligation; if severable, the remedy is appor- 
tioned to the extent to which the contract was 
performed before breach occurred. The failure 
or refusal to perform an obligation, or the volun- 
tary abandonment of the contract releases the 
obligee from the duty of making demand, and 
performance or tender, and justifies him in aban- 
doning the contract without waiting until the con- 
tract period expires, and gives him an immediate 
right of action for the breach and to rescind. 

But where the default is in something that is 
not vital and that is susceptible of compensation 
in damages, the contract is not discharged, al- 
though an offset will be allowed for the extent 
of the injury occasioned by the breach. 

A breach which is purely technical and from 
which one has suffered no damage does not ex- 
cuse him from carrying out all the covenants on 
his part to be performed. 

A breach of contract may be waived. Thus, 
where a breach by one party occasioned an in- 
jury to the other which is susceptible of com- 
pensation in damages, it does not relieve the lat- 
ter from liability under the contract where both 
parties have gone on and performed it for some 
time thereafter. 



PARTNERSHIP. 

Definition. A partnership is a contract rela- 
tion subsisting between persons who have com- 
bined their property, labor or skill in an enter- 
prise or business, as principals, for the purpose 
of joint profit. 

The partnership relation does not arise from 
mere operation of law, but can be created only 
by the voluntary act or contract, express or im- 
plied from their acts, of the parties entering into 
it ; and mutual agency and a communion of profit 
and loss is its true criterion. 

What Constitutes a Partnership. In general, 
community of interest, a sharing in the profits 
and losses, the existence of the mutual relation- 
ship of principal and agent, and an intention on 
the part of the persons interested and uniting in 
the prosecution of the common enterprise to be- 
come and act as partners, are the proximate tests 
as to the existence of a partnership between them. 

Whether the association of several persons in 
business constitutes a partnership as between 
themselves depends upon their intention as le- 
gally ascertained, and it is not necessary that 

20 



COMMERCIAL LAW 21 

the term partnership be used hi the articles in 
order to constitute one. 

Participation in profits and losses in a joint 
business or undertaking affords the usual test of 
an intention to form a partnership. An agree- 
ment for such sharing of profits is not, however, 
a conclusive test and does not absolutely consti- 
tute a partnership, if other circumstances show 
that no partnership was intended. Where, in ad- 
dition to the participation in the profits and losses, 
it appears that the capital, or property, or both, 
is contributed by all to be used in common for 
their joint benefit, it clearly constitutes a part- 
nership. 

The receipt of a share of the profits as compen- 
sation for services as agent, servant, clerk, man- 
ager, broker or other person acting in a fiduciary 
capacity, is inconsistent with the idea of a joint 
proprietorship of the business and profits as such, 
and does not constitute a partnership between 
the parties. 

A loan or advance of money to be invested in 
some business or enterprise, the lender to shape 
in the profits as or in lieu of interest on, or in 
repayment of such loan or advance, does not con- 
stitute a partnership; it is a mere loan on con- 
tingent compensation. 

Contracts between parties for sharing losses or 
expenses, but not the profits, as where two joint 
owners agree to share in the expense of keeping 



22 COMMERCIAL LAW 

property, do not constitute a partnership, even 
though they may call themselves partners. 

If the joint or common enterprise is not one 
entered into for the purpose of profit, it does not 
constitute a partnership. 

Joint stock companies and unincorporated as- 
sociations, unless otherwise provided by statute, 
are treated as, and have all the attributes of, a 
common partnership. The rule has been adopted 
in many of the states that, where several parties 
attempt to form a corporation, but, by reason of 
failure to comply with the statute or otherwise, 
no corporate organization has been perfected, but 
have nevertheless proceeded to transact business, 
sharing in gains and losses, they thereby become 
partners and liable as such. 

The partnership relation is one founded upon 
mutual trust and confidence, and the right rests 
with each partner to say what if any new mem- 
bers shall be admitted to the firm. 

Executory contracts to form a partnership, as 
agreements to take effect at a future date, and 
the like, do not constitute a partnership. Neither 
does the mere intention to form one. 

In many instances where a person holds himself 
out, or permits himself to be held out, as a part- 
ner in a firm, he will be held liable as such as to 
third parties where they have been misled or have 
acted upon such holding out. The continued use 
of the old firm name by the continuing partner, 



COMMERCIAL LAW 23 

with the acquiescence of the retiring one, after a 
duly advertised dissolution not occasioned by 
death is a sufficient holding out. 

Kind of Partnerships. Partnerships with ref- 
erence to the class of business in which they are 
engaged may be divided into trading and non- 
trading partnerships. 

A trading partnership is one the principal part 
of the business of which is buying and selling, or 
manufacturing or otherwise preparing for sale 
and selling articles or commodities for profit. 

A non-trading partnership is one engaged in 
the prosecution of some occupation or calling not 
of a commercial character. ' 

With reference to the character and extent of 
their business, partnerships may be divided into 
universal, general, particular and limited partner- 
ships. 

A universal partnership is one in which all the 
property owned by the parties is contributed and 
all profits, however made, are for the joint benefit. 
They are very rare. 

A general partnership is one in which the par- 
ties carry on all their trade and business, what- 
ever it may be, for the joint benefit and profit of 
all concerned, whether or not the contributions 
are equal or the capital stock limited. 

A particular partnership is one formed for a 
special or particular branch of business, as con- 



24 CO M 21 ERCIAL LA W 

tradistinguished from the general business or em- 
ployment of the parties or of one of them. 

A Limited Partnership. A limited partnership 
is a partnership in which the liability of some of 
its members to bear losses is restricted to a de- 
fined amount. Formerly the name limited part- 
nership was given to one formed for a special or 
particular business purpose or enterprise. 

Such partnerships must consist of one or more 
general partners, whose liability is unrestricted, 
and one or more special partners, contributing a 
specific amount of capital to the common stock, 
whose liability for the debts of the partnership 
is limited to the amount so contributed. The per- 
sons desirous of forming such a partnership must 
make and severally sign a certificate containing 
the name of the firm under which the partnership 
is to be conducted, the names of all the partners, 
both general and special, distinguishing which are 
general and which are special, the general nature 
of the business, the amount of capital which each 
special partner shall have contributed, and the 
time when the partnership is to commence and 
terminate. The partners must immediately pub- 
lish the terms of the partnership. The statutes 
of most of the states restrict the business for 
which a limited partnership may be formed to 
those of a mercantile, mechanical and manufac- 
turing nature. 

Partnership Purposes. Partnerships are not 



COMMERCIAL LAW 25 

confined to mere commercial trade or business, 
but may extend to manufactures, professions and 
all lawful occupations and business, as farming, 
manufacturing, mining, lumbering, as well as the 
business of lawyers, doctors, artists, mechanics 
and nearly all other employments. 

Formation of Partnerships. A partnership as 
between the parties is a contract relation and can 
only be formed by the voluntary agreement of 
the parties. Any contribution in the shape of 
capital or labor, or any act which may result in 
liability to third parties, is a sufficient considera- 
tion to support a partnership agreement. 

A contract of partnership or an agreement for 
the transfer of a share in a partnership need not 
be in writing under the Statute of Frauds. A 
partnership agreement which is not to begin with- 
in a year must be in writing. 

If no time is specified in the agreement for 
which the partnership shall continue, it is a part- 
nership at will and may be continued indefinitely 
on the same terms, or brought to an end at any 
time at the election of any of the partners. When 
its duration is fixed, if it is continued after that 
period, it will be converted into a partnership at 
will. 

When the question of partnership arises, as be- 
tween the parties themselves, the agreement out 
of which the supposed partnership arises is to be 
construed as any other instrument between the 



26 COMMERCIAL LAW 

same parties. Any part of the articles of a part- 
nership may be waived, rescinded, changed or 
qualified by the conduct or established and uni- 
form usage of the parties. 

In the absence of anything in the articles with 
reference to the period of division of profits of 
a co-partnership, they are to be divided from time 
to time, as the majority of the partners may de- 
cide. 

Persons Composing the Firm. Any person 
who has the capacity to enter into a contract and 
transact business on his own account may enter 
into a partnership; and there is nothing to pre- 
vent any number of persons who choose from 
going into partnership. 

An alien friend may be a partner in any com- 
mercial or other business. 

A partnership contract entered into by a luna- 
tic or one under guardianship, as a spendthrift, 
drunkard, or otherwise, is valid and binding upon 
him, if executed, where the others were unaware 
of his infirmity. 

An infant may become a partner. Such con- 
tracts are not void but merely voidable. 

At common law the partnership contract of a 
married ivoman was void if she had no separate 
estate ; where she had such an estate she was per- 
mitted to embark it in a partnership. The com- 
mon law rule has been changed in many states 
by statute, 



COMMERCIAL LAW 27 

A corporation, being only a legal person and 
having only suck powers as are conferred npon 
it by its charter or the statute under which it was 
formed, cannot as a general rule become a part- 
ner, either with other corporations or with indi- 
viduals. 

Kinds of Partners. An ostensible partner is 
one who is held forth to the world as one. Where 
such holding forth is done with his knowledge 
and consent, whether he be actual, ostensible or 
nominal partner, all the liability of a general part- 
ner attaches to him. 

A dormant partner is one who takes no active 
part in the business and whose name does not 
appear in the title of the partnership, and who 
is unknown to those who give credit to the firm. 
Where the name of the partner appears, but he 
takes no part whatever in the business, he is more 
properly a silent or sleeping partner. And one 
who participates in the business, but keeps his 
relations with the firm a secret, is sometimes 
called a secret partner. 

Partnership Property. The capital of the firm 
is the sum of the amounts agreed to be contributed 
by each partner as the basis for beginning or 
continuing the partnership business. The con- 
tributions need not be in money, but may be made 
in property of any kind in which a joint owner- 
ship may be had and which can be reached by 
creditors. Property purchased with the partner- 



28 COMMERCIAL LAW 

ship funds, though purchased by one of the part- 
ners in his own name, is partnership property. 

Partners act as trustees of the partnership prop- 
erty as to each other, and all acts in relation to 
it and advantages derived from it inure to the 
benefit of the firm. A sale of the whole or of his 
entire interest by one partner effects a dissolu- 
tion of the firm, and the remaining partners are 
therefore entitled to the possession of the whole 
for the purpose of winding up the affairs of the 
concern. 

Real estate originally contributed as stock, even 
though purchased with the separate means of the 
partners, becomes partnership property and a 
part of the capital stock of the firm. Eeal estate 
which was leased for, and devoted to, partner- 
ship purposes, and paid for out of partnership 
funds, is partnership property, although the legal 
title may have been taken in the name of one 
partner, he being held in equity as trustee for the 
firm. Eeal estate taken by partners, whether as 
tenants in common or in the name of one, in pay- 
ment of a debt due the firm, is partnership prop- 
erty, the equitable title vesting in each in propor- 
tion to their respective interests. 

The Interests of the Partners. A partner has 
no specific interest in any particular part of the 
firm property; his interest consists of his portion 
of the residue left after payment of all the debts 



COMMERCIAL LAW 29 

and liabilities of the firm and the adjustment of 
their partnership claims against each other. 

In the absence of any agreements to the con- 
trary, a presumption exists that it was the in- 
tention of the partners to share the profits and 
bear the losses equally, even though the capital 
may have been contributed in unequal propor- 
tions, or though capital may have been contributed 
by one and labor by another. 

The sale or encumbrance by a partner of his 
interest in the partnership assets passes to the 
purchaser only his share of what would remain 
after the payment of the partnership debts and 
the adjustment of the equities of the parties. 

Partners may agree that the whole or any part 
of the joint property of the firm shall become the 
separate property of one or more or all of the 
partners, and such an agreement, based upon a 
sufficient consideration, and in the absence of 
fraud or mistake, will effect its conversion into 
individual assets. 

As a general rule, a sale by a partner to his co- 
partner or a third person for a valuable consid- 
eration, not made in contemplation of insolvency, 
of all his interest in the firm, is valid, even though 
the buyer or the seller or both are actually in- 
solvent f and the creditors are thus defeated. 

Powers and Rights of Partners. It is a prin- 
ciple of universal application that each partner 
is, in contemplation of law, the general and ac- 



30 COMMERCIAL LAW 

credited agent of the whole firm, with power as 
such to bind it in all matters within the scope of 
and which legitimately pertain to the partnership 
business; limited, however, to the exercise of the 
powers of the firm within the scope of its ordi- 
nary business, and not extending to other and 
distinct matters. 

The scope of the business as the term is used 
with relation to the power of partners to bind 
the firm, generally includes what is reasonably 
necessary to the successful conduct of the busi- 
ness, measured by its nature, the usage of others 
engaged in the same occupation in the same lo- 
cality, and the known habits, conduct and usage 
of the particular firm in question. 

A partner in a partnership of a general com- 
mercial nature may pledge or sell the partnership 
property, buy goods, borrow money, contract and 
pay debts, draw, make, sign, indorse, accept and 
transfer negotiable paper in the name of and on 
account of the partnership. But in non-trading 
firms a partner does not possess general power 
to bind the partnership and has no power as a 
general rule to contract debts and issue commer- 
cial paper. 

Third persons dealing with a partnership are 
warranted in assuming that each partner is 
clothed with the usual powers pertaining to a 
partnership formed for the transaction of that 
particular kind of business, and so far as they 



COMMERCIAL LAW 31 

are concerned restrictions upon such powers, con- 
tained in the articles or resulting from private 
arrangements between the partners, of which they 
have no knowledge, can be given no force and 
effect. 

Each partner, being a principal as well as an 
agent, has implied power to employ such labor 
or engage such services as are necessary to the 
conduct of the ordinary business of the firm. An 
agent or servant properly employed by one part- 
ner is equally accountable to and subject to the 
control of each and all the partners, and may be 
discharged by one partner as well as by another. 

It is within the implied power of every mem- 
ber of an ordinary trading partnership to pur- 
chase, for and on the credit of the firm, such 
goods as are or may be necessary for carrying 
on its business in the usual way, and if the pur- 
chase is made for the use of the firm, though 
upon the single credit of the buyer, and, though 
the seller be not aware of the object of the pur- 
chase or even of the existence of the firm, he 
may nevertheless hold the partners liable for the 
purchase price. But, whether made individually 
or in the name of the firm, if the purchase is 
outside of the real or apparent scope of the part- 
nership business, the firm is not bound. Delivery 
of goods purchased, to one partner, is delivery to 
the firm. 

The sudden exigencies of commerce render it 



32 COMMERCIAL LAW 

absolutely necessary that the borrowing power 
should exist in the members of a trading part- 
nership, and unless the money is obtained for a 
purpose outside the scope of the partnership busi- 
ness to the knowledge of the lender, the power to 
thus bind the firm is deemed to follow the estab- 
lishment of the relation as a legal consequence. 

Any member of an ordinary trading partner- 
ship ean bind the firm by making, drawing, ac- 
cepting or indorsing mercantile paper. One part- 
ner has the implied power to bind the firm by 
checks, not post dated, drawn in the partnership 
name upon the bankers of the partnership. 

One partner has implied power to collect and 
receipt for debts due the firm, and payment to 
one partner extinguishes the obligation. Implied 
power to pay the indebtedness of the firm also 
rests with each partner. 

Duties and Liabilities of Partners. In their 
dealings with each other partners occupy a posi- 
tion of trust, and are required to exercise toward 
each other the most scrupulous good faith. Nor 
is this requirement of perfect good faith confined 
to persons who are actually co-partners, or to the 
period during which the partnership actually 
exists, but it extends also to persons negotiating 
for a partnership not yet formed, as well as to 
persons who have dissolved a partnership for- 
merly existing between them, who are engaged in 



COMMERCIAL LAW 33 

the winding up and settlement of the partnership 
affairs. 

Partnership contracts are to be considered dur- 
ing the lifetime of the partners as joint and not 
as joint and several; and each partner is, there- 
fore, liable in full for all the debts of the firm, 
irrespective of the ability of his co-partners to 
contribute and regardless of the proportion of 
his interest in the firm, provisions in the articles 
or elsewhere restricting the liability of certain 
partners being of no effect as to creditors having 
no notice of such provisions at the time the in- 
debtedness was incurred. 

Matters Relating to the Conduct of the Busi- 
ness. Contracts and transactions entered into by 
a partner, either in fact for the firm or within 
the scope of its business, though the fact of the 
partnership is unknown, are deemed to be part- 
nership transactions. 

One partner may procure the insurance of the 
entire partnership property for the benefit of the 
firm. 

Assignments may be made by co-partners of 
the partnership property for the payment of part- 
nership debts. 

Dissolution. The dissolution of a partnership 
consists in the annulling of or putting an end to 
it. This is effected not only by winding up its 
affairs and putting an end to its business, but 
also by any change of membership, and however 



34 COMMERCIAL LAW 

numerous such changes may have been, though 
without break in the continuity of the business, 
at each change an existing firm is dissolved and 
a new one is formed. The causes for which a 
dissolution may be had, or which will of them- 
selves effect a dissolution, may be enumerated to 
be the mutual consent of all the partners, the will 
of any partner, death, the transfer of a partner's 
interest, fraud vitiating the original contract, in- 
sanity or insolvency of a partner, the hopeless 
state of the partnership business, the occurrence 
of some event which renders the continuance of 
the partnership illegal or the misconduct of a 
partner. 

Notice of the dissolution of a partnership is 
necessary to terminate the agency of each part- 
ner. With regard to former dealers with or cus- 
tomers of the firm, actual and express notice must 
be given. As to strangers and non-dealers, that 
is, persons who have not given credit to the firm, 
a general notice of dissolution given by publica- 
tion in a newspaper at the place where the busi- 
ness was carried on is almost universally held 
to be sufficient. 

The effect of a dissolution is to put an end to 
all powers of the partners to. act as agents for 
the firm and for each other and to incur liability 
on behalf of the firm. 

Powers and Rights of Partners after Dissolu- 
tion. A partnership, notwithstanding its disso- 



COMMERCIAL LAW 35 

lution, continues to exist so far as may be neces- 
sary for the winding up of its business. But this 
doctrine cannot be carried farther than that a 
partner has implied authority to bind the firm, 
so far as may be necessary to settle and liquidate 
existing demands, and to complete transactions 
begun but not finished at the time of dissolution. 
A dissolution revokes the power of the partners 
to bind each other in respect to any new con- 
tracts, and restricts it to a settlement of the part- 
nership concerns. Upon the dissolution of a part- 
nership by the death of a partner, the survivor 
becomes the sole owner of all the personal prop- 
erty. 

Winding Up and Distribution. In order to 
wind up the affairs of a dissolved partnership it 
is necessary, first, to pay its debts; secondly, to 
settle all questions of accounts between the part- 
ners, and thirdly, to divide the unexhausted assets, 
if any, between the partners in proper propor- 
tions ; or, if the assets are insufficient to pay the 
debts, then to make up the deficiency by proper 
contribution between the partners. A dissolution, 
whether general or partial, does not discharge 
any of the partners from liabilities previously in- 
curred by them; the partnership assets must 
therefore be applied to the satisfaction of part- 
nership claims before they can be participated in 
by the individual partners or their individual 
creditors. 



CORPORATIONS. 

Organization of Corporations. A corporation 
is a body consisting of one or more persons es- 
tablished by law for certain specific purposes, with 
the capacity of succession (either perpetual or 
for a limited period), and other special privileges 
not possessed by individuals, yet acting in many 
respects as an individual. 

Corporations may be classified as — 

(1) Sole, consisting of but one member at a 
time; or aggregate, consisting of more than one 
member. 

(2) Public, for the purposes of government 
and the management of public affairs ; or private, 
formed by voluntary agreement for private pur- 
poses. 

Corporate Poivers. At common law the ordi- 
nary powers considered essential to every corpor- 
ation are these : 

(1) To have succession, by its corporate name, 
either perpetually or for a limited period. 

(2) To take and grant property, to contract 
obligations and to sue and be sued by its cor- 
porate name, in the same manner as an individual. 



COMMERCIAL LAW 37 

(3) To purchase lands and other property, and 
to receive grants of privileges and immunities, 
to hold the same for the benefit of its members 
and their successors in common. 

(4) To have a common seal. 

(5) To make by-laws, which are considered as 
private statutes for the government of the cor- 
porate body. 

(6) To appoint and remove its officers and 
expel members. 

A corporation has no powers whatever except 
those given by its charter or by the law under 
which it is incorporated. The formation of cor- 
porations is regulated by the statutes of the vari- 
ous states. 

The practice of granting charters by special 
act has been largely superseded by general laws. 
The provisions of these general laws may be out- 
lined as follows: 

If a stock company is conxemplated a part of 
the stock must be first subscribed to, and in any 
case' an organization must usually be effected by 
the election of directors. A certificate, or articles 
of association, is then prepared, which must be 
signed and acknowledged by a certain number of 
corporators, usually setting forth — 

(1) The name of the corporation. 

(2) The purpose for which it is formed. 

(3) The term for which it is to exist. 



38 COMMERCIAL LAW 

(4) The place or places where its business is 
to be transacted. 

(5) The names and residences of the sub- 
scribers, if there be capital stock, and the num- 
ber of shares taken by each. 

(6) The number of directors and the names 
and residences of those chosen for the first year. 

(7) The amount of the capital stock, if any, 
and the number of shares into which it is divided 
at its par value. 

(8) That the required proportion of the cap- 
ital has been paid in cash to the treasurer, stating 
his name and residence. 

A corporation must have a full and complete 
organization and existence as an entity, and in 
accordance with the law to which it owes its origin, 
before it can assume its franchises or enter into 
any kind of contract or transact any business. If 
a corporation has acquired an existence de facto 
under the color of law, the validity of its forma- 
tion cannot be attacked collaterally, but only by 
quo warranto proceedings instituted by the attor- 
ney general. 

A corporation is not responsible for the acts 
nor bound by the contracts of its promoters done 
or entered into before incorporation, unless it is 
made so by its charter or by its own express 
promise or adoption after incorporation, or where 
it has received the benefit of a contract made in 
its behalf, 



COMMERCIAL LAW 39 

Name of Corporation. It is essential that a 
corporation should have a name by which it may 
sue or be sued, and perform all legal acts. A 
corporation is recognized by law as having an 
existence as an artificial person distinct from the 
members which compose it. 

Powers and Liabilities of Corporations. The 
charter of a corporation is the measure of its 
powers. The charters of corporations are con- 
tracts and are protected from invasion by the 
Constitution of the United States. 

A corporation has power to acquire unlimited 
personal property unless restricted by its char- 
ter. Corporations with legal capacity to hold 
property may take and hold it in trust in the 
same manner and to the same extent as a private 
individual may do. They may pledge their stocks 
and bonds as security for their debts. They may 
lease their property. 

Private corporations have implied power to 
borrow money in the transaction of their legiti- 
mate business, and may also issue promissory 
notes for any legitimate purpose. They have also 
power to draw and accept drafts and bills of ex- 
change and may issue bonds. 

The power of corporations to hold real estate 
is regulated by the statutes of the different states. 
Unless restrained by law or by the provisions of. 
its charter, the corporation has implied power to 
acquire, hold and dispose of real estate. 



40 COMMERCIAL LAW 

The power of a corporation to mortgage its 
property is dependent upon the general right of 
disposal which it may possess. Where the latter 
right exists, the power to mortgage necessarily 
follows. 

A corporation is like an individual in its ca- 
pacity to contract, appoint agents and incur ordi- 
nary liabilities, and the use of a seal is only neces- 
sary where its use would be required from an 
individual. 

It is a well settled principal that corporations 
have implied power, unless restrained by law, and 
except as so restrained, to make all such contracts 
as will further the objects of their creation. They 
have no powers as to contracts except such as are 
expressly granted or necessarily implied, and 
their contracts must be made in the manner au- 
thorized by their charter. 

Liability for Torts. It is a well settled rule 
that corporations will be held responsible in civil 
actions at the suit of an injured person, for every 
grade and description of forcible, malicious and 
negligent tort or wrong which they commit, how- 
ever foreign to their nature or beyond their 
granted powers the wrongful transaction or act 
may be. Corporations are liable for the acts of 
their servants while such servants are engaged in 
the business of their principal, in the same man- 
ner and to the same extent that individuals are 
liable under like circumstances. 



COMMERCIAL LAW 41 

A corporation may be liable for assault and 
battery and false imprisonment, or may be held 
liable for damages caused by the false representa- 
tions of its agents. Corporations may be liable 
for libel and slander and may be compelled to pay 
punitive damages. An action may be maintained 
against a corporation for conspiracy or malicious 
prosecution. 

A corporation cannot be indicted for treason 
or felony, or for crimes punishable by imprison- 
ment. Indictment lies against a corporation for 
nuisance. A corporation may be indicted and 
fined for libel. 

Taxation of Corporations. The taxation of 
various kinds of corporations is regulated by stat- 
ute in the different states. Corporations, like 
actual persons, are liable to be taxed for their 
personal property in the places where they reside. 
Foreign corporations conduct business in a state 
only by express or implied permission founded 
upon comity, and are clearly liable to taxation. 
The real property of corporations is taxable 
where it is situated. The capital stock of a cor- 
poration is personal property and a tax levied on 
it is a personal tax. 

Consolidation of Corporations. Where the 
rights, franchises and effects of two or more cor- 
porations are, by legal authority and agreement 
of the parties, combined and united into one whole 
and committed to a single corporation, the stock- 



42 COMMERCIAL LAW 

holders of which are composed of those of the 
companies thus agreeing, this is in law a con- 
solidation. Corporations cannot be consolidated 
without the express sanction of the state. Ee- 
organization is a term generally used to indicate 
the formation of an entirely new corporation for 
the purpose of purchasing the property of an- 
other corporation. The consent of all the stock- 
holders is necessary to a consolidation, even when 
sanctioned by statute. 

The dissenting stockholder may enjoin an un- 
authorized consolidation or exact compensation 
for his interest in the consolidated company, and 
is relieved from liability on his original subscrip- 
tion. 

By-laws of a Corporation. A by-law is a per- 
manent rule of action, in accordance with which 
the corporate affairs are to be conducted. The 
power to make by-laws is always stated to be one 
of the essential incidents and rights of a corpora- 
tion. By-laws are made by the stockholders in 
meeting assembled. They must be reasonable; 
they must not interfere with the vested rights of 
the stockholders ; and they must not be contrary 
to public policy or the established law of the land. 

Stock. There are three methods of issuing 
stock. It may be issued, first, by means of sub- 
scriptions payable in cash, the subscription being 
made in writing, or by acts equivalent thereto; 
second, the issue may be by means of subscript 



COMMERCIAL LAW 43 

tions payable in labor, property, or both; third, 
the issue may be by a stock dividend. 

Watered stock or fictitiously paid-up stock is 
stock which is issued as fully paid-up stock when 
in fact the whole amount of the par value thereof 
has not been paid in. The corporation itself is 
not liable to any person by reason of the issue 
of its stock as full-paid stock when, as a matter of 
fact, it has not been fully paid. The stockholder 
has no remedy herein against the corporation, 
since his remedy is against the corporate officers, 
as in other cases of breach of trust by them. As 
regards corporate creditors, they cannot complain 
so long as the corporation remains solvent and 
pays its debts. Where stock is issued for cash 
at less than par the parties taking it are liable to 
corporate creditors for the unpaid par value 
thereof. Persons purchasing stock with notice 
that it had not been paid up, although in fact it 
had been issued as paid up, are liable on such 
stock to the same extent that their transferrers 
were liable. A bona fide purchaser for value and 
without notice of stock issued by a corporation 
as paid up cannot be held liable on such stock 
in any way, either to the corporation, corporate 
creditors, or other persons, even though the stock 
was not actually paid up as represented. 

A contract of subscription for the shares in an 
incorporated company may be entered into in 
various ways. In general a contract of subscrip- 



44 COMMERCIAL LAW 

tion may be made in any way in which other con- 
tracts may be made. Any agreement by which a 
person shows an intention to become a stock- 
holder is sufficient to bind both him and the cor- 
poration. Merely accepting and holding a cer- 
tificate of stock is sufficient to constitute one a 
stockholder. A subscription to stock is a con- 
tract; and, in general, any one who may contract 
may subscribe. The corporation itself, however, 
cannot be a subscriber to its own stock. A sub- 
scription for shares implies a promise to pay for 
them, and this promise sustains an action to col- 
lect without proof of any particular considera- 
tion. A municipal corporation has no implied 
power or authority to subscribe for stock in any 
other corporation. It is clearly constitutional for 
the legislature, upon granting a charter, to fix 
the capital stock and to authorize the corporation 
to increase or decrease that capital stock. In the 
absence of express authority from the state, a 
corporation has no power whatsoever to increase 
or reduce the amount of its stock, and any at- 
tempt upon the part of the corporation to do so 
is wholly illegal and void. 

A corporation has inherent power to issue bonds 
for the payment of money, and no express power 
is necessary to authorize the issue. The corpora- 
tion may issue bonds unsecured by mortgage. 
Hence, where a mortgage is made to secure bonds, 
and the mortgage is declared illegal and void by 



COMMERCIAL LAW 45 

the courts, the bonds may be valid as unsecured 
obligations. It is legal for a corporation to sell 
its bonds to its directors. A corporation has 
power to pledge its bonds as security for a cor- 
porate debt. If any material part of the bond is 
forged the bond is void. The bonds of a cor- 
poration are negotiable, and the corporation is 
unable to set up many defenses against bona fide 
holders which it might have set up against the 
parties to whom the bonds were originally is- 
sued. Nearly all bonds of corporations have at- 
tached to them coupons representing the semi- 
annual or annual interest on the bonds them- 
selves. Coupons may be detached from the bond 
and sold like promissory notes. They are nego- 
tiable and a bona fide holder of them is protected. 
Directors. Any regulations affecting the di- 
rectors and any restrictions upon their powers 
and actions will, for the most part, appear only 
in the by-laws. Specially important matters some- 
times appear in the charter, but in the main the 
stockholders must look to the by-laws to direct 
and control the operations of the directors. Much 
latitude is allowable in the arrangement of the 
by-laws affecting directors. In many states the 
number of directors is, within certain limits, fixed 
by statute. The ownership of stock as a qualifi- 
cation for the directory is usually regulated by 
statute. In some states such qualifying stock 
must be owned when the director is elected. 



46 COMMERCIAL LAW 

At common law the directors have entire charge 
of the property and affairs of the corporation, 
with fnll power and authority to manage and con- 
duct the same. The statement of the by-laws to 
this effect is, therefore, nothing more than a re- 
iteration of the conditions as they exist, brought 
in as a matter of information. 

Unless so provided by statute, charter or by- 
laws, the board of directors has no power to fill 
vacancies caused by the resignation or death of its 
members. In such event the power is reserved 
to the stockholders, and any vacancies in the board 
must wait until the next annual meeting with its 
election of directors, or be filled by a special elec- 
tion, the stockholders being called together for 
the purpose. As long as the board can assemble 
a quorum of its entire membership it may con- 
tinue to act despite vacancies, but it is safer to 
keep the membership up to the prescribed quota, 
and it is almost the invariable rule to give the 
board power to fill vacancies as they occur. The 
by-laws might properly provide that continued 
absence from meetings of the board would of itself 
vacate the position of the absentee director. 

The frequency of regular meetings of the board 
is to be decided by particular conditions. Monthly 
meetings are usual, but in close corporations with 
a small board it is often unnecessary to meet 
regularly more than once in each quarter, or even 
once each year. The nature and formalities of 



COMMERCIAL LAW 47 

the call necessary to summon a special meeting 
of the board are purely matters for the corpora- 
tion to determine. Usually the president is given 
authority to call such meetings at his discretion. 
Generally it is provided also that such meeting 
shall be called upon written request of a certain 
number — usually two-thirds — of the directors. 
The place of meeting should be fixed by the by- 
laws, though a proviso may be added that special 
meetings may be held elsewhere by unanimous 
consent of the board. 

It is supposed that members of the board are 
familiar with the 'date of regular meetings. 
Hence, there is not the same legal necessity for 
notice that exists in the case of special meetings. 
It is usual, though, to provide that notice of regu- 
lar meetings shall be given by the secretary as a 
matter of convenience and to prevent such meet- 
ing from being overlooked. Special meetings, 
unless adequate notice thereof has been given, 
are not legally called and their action may be set 
aside. Notices of special meetings are usually 
sent by either mail or telegraph such reasonable 
time before the meeting as will, under ordinary 
circumstances, permit the attendance of all the 
members of the board. 

If the statutes are silent as to the number of 
directors requisite for a quorum, the charter or 
by-laws will control. If both the statutes and 
the charter and by-laws are silent, the common 



48 COMMERCIAL LAW 

law controls and a majority of the full member- 
ship of the board is then requisite for a quorum. 

The by-laws should designate the officials of 
the corporation, the time of their election and 
the period for which they are elected. It is also 
usual to provide that they shall hold office until 
the election and qualification of their successors, 
unless sooner removed by action of the board. It 
is also usually specified that election shall be by 
ballot, and that the board shall fix the compensa- 
tion of officers and fill any vacancies that may 
occur on the official staff. 

If an officer is elected for a specified time he 
cannot usually be legally removed except for suf- 
ficient cause, and not then until he has had an 
opportunity to appear in his own behalf. 

Directors cannot claim any salary or compen- 
sation for their services as directors other than 
is expressly set forth in the by-laws. Definite 
salaries might be fixed, but compensation is 
usually provided in the form of a certain stipend 
for attendance upon meetings, which is not earned 
unless the director is present at the entire 
meeting. 

Officers. The term officers is here applied to 
those agents of the corporation appointed or 
elected — usually by the board of directors — as 
direct executive representatives of the board and 
of the corporation. The details relating to the 
officials of a corporation are matters of by-law 



COMMERCIAL LAW 49 

prescription. The statutes are usually silent in 
the matter, the charter seldom takes cognizance 
of anything pertaining to the corporate officials, 
and the by-laws control. 

The necessary officers of a corporation are the 
president, secretary and treasurer. In the smaller 
corporations two of these offices are sometimes 
held by one person. In most cases, however, the 
number of officers is increased by the addition of 
one or more vice-presidents, a managing director 
or general manager, and at times a chairman of 
the board, counsel and auditor. The officials 
named are for the most part elective, and, with 
the occasional exception of the general manager, 
are supposed to report directly to the board or 
to one of the standing committees. 

The president is usually the presiding officer. 
His duties vary widely, according to the size and 
character of the corporation. In the smaller cor- 
porations he is frequently assigned the active 
management of the business in addition to the 
duties more strictly pertaining to his office. Vice- 
presidents perform the duties of the president 
in the absence of that official or of the ranking 
official, in the order of precedence. 

The secretary has charge of the corporate seal 
and affixes and attests it whenever necessary. 
He generally has entire charge of the details 
of the issue and recording of stock. The cor- 
porate records are entrusted to him, and the 



50 COMMERCIAL LAW 

various state reports are usually prepared by 
him. His powers and duties as to signing con- 
tracts are entirely dependent upon the by-laws 
or conditions of the particular corporation. 

The treasurer is usually given entire charge 
of the corporate finances and all that immediately 
relates thereto; also the custody of all corporate 
instruments and evidences of value. He signs 
all checks with or without the president, as pre- 
scribed by the directors or by-laws, and partici- 
pates in the execution of all the instruments 
pertaining to the financial transactions of the 
corporation. 

Officers are distinguished from employes by 
the fact that unless it is specified that they are 
to receive salaries, they are not, as a rule, entitled 
to charge for their official services. 

Dissolution of Corporations. The dissolution 
of a corporation is the termination of the exist- 
ence of the corporation by the extinguishment of 
the corporate franchise conferred by the state 
upon the body of the corporators. 

The dissolution of a corporation may happen 
in the following ways: 

(1) By expiration of the time limited in the 
charter ; 

(2) Upon the happening of a contingency, 
prescribed by the charter; 

(3) By surrender of the franchise to the 
state ; 



COMMERCIAL LAW 51 

(4) By the act of the legislature; 

(5) By failure of an integral part of the 
corporation ; 

(6) By forfeiture of the franchise in a proper 
judicial proceeding. 

Where a corporation has lost its franchise by 
forfeiture, surrender, or otherwise, in law it has 
wholly ceased to exist, and will not be recognized 
as a corporate body. Debts due from it are 
extinguished and suits brought by or against it 
are abated by its dissolution. At common law, 
upon the legal dissolution of a corporation all 
its real estate reverted to the grantor and its per- 
sonal property to the king. In equity, however, 
it is the rule that the capital or property and 
debts due to an ordinary trading or manufac- 
turing corporation constitute a trust fund for the 
payment of the dues of creditors and stock- 
holders; and a court of equity, which never 
allows a trust to fail for want of a trustee, will 
lay hold of this fund wherever it may be found 
and apply it to the purposes of the trust. In 
many states statutes have been passed providing 
a method of winding up the affairs of a corpo- 
ration that has been dissolved. 

As a general rule, debts of an old corporation 
fall upon a new corporation which is its legal 
successor. 



COMMEECIAL PAPER. 

Negotiable instruments are instruments on 
which a right of action passes by an assignment 
by mere indorsement. In its enlarged significa- 
tion, the term ' ' negotiable ' ' applies to any written 
security transferable by endorsement or delivery, 
so as to vest in the transferee the legal title and 
enable him to maintain an action on the security 
in his own name. Usually the test of the nego- 
tiability of an instrument is found in the use of 
the words " order' ' or "bearer." It may be 
stated as a rule of law that these words, or their 
equivalent, are essential to invest the instrument 
with the attribute of negotiability. 

Bills of exchange and promissory notes are the 
instruments concerning which questions of nego- 
tiability are raised most frequently. A certificate 
of deposit, which is a receipt for money deposited, 
with a promise to hold or to pay, as may be 
agreed, may or may not be negotiable, and when 
negotiable may be said to partake of the attributes 
of a promissory note. A mere bank deposit book 
is not negotiable. 

Orders drawn by one person upon another 

52 



COMMERCIAL LAW 53 

for the benefit of a third person, payable in goods 
or payable in money from a specified fund, are 
not negotiable instruments. 

Due bills, which are acknowledgments of in- 
debtedness with no express promise of payment, 
are made negotiable by statute in some states. 
In the absence of statute or words indicating a 
promise of payment, a mere due bill or I. 0. U. 
is not, according to the weight of authority, 
regarded as a promissory note. 

Letters of credit, which may be defined as 
open letters of request, whereby one person 
(usually a merchant or banker), requests another 
to advance money or to give credit to a third 
person named in the letter, and promises to repay 
the amount or to accept bills of exchange drawn 
on himself for the amount, are not negotiable 
instruments. 

Bills of lading are not negotiable instruments 
in the same sense as promissory notes or bills 
of exchange, though in several states the question 
is affected by statutes, making bills of lading 
negotiable or quasi-negotiable; nor warehouse 
receipts, though here again the question has 
been affected by statute. 

Beceiver's certificates may be called quasi- 
negotiable instruments. The judicial order 
authorizing their issue generally provides that 
they may be made payable to order or bearer, 
and the property in them is transferable by 



54 COMMERCIAL LAW 

endorsement and delivery, as in the case of 
commercial paper. 

Eailroad bonds made payable, as they usually 
are, to the trustee named in the mortgage given 
to secure them, or to the bearer, are in effect 
merely bills or notes and are negotiable. That 
they are called bonds does not necessarily imply 
that they are sealed, even if this would affect 
their quality of negotiability. Debenture bonds 
in the form in common use in England may be 
said to possess, when made payable to bearer or 
order, the attribute of negotiability. 

Municipal bonds in the customary form, with 
interest coupons attached, and payable to bearer 
or to a named person or order, are, when put 
upon the market, treated as commercial securi- 
ties, and possess the qualities and incidents of 
negotiable promissory notes, and it makes no 
difference that they bear the corporate seal; nor 
will such bonds be deemed unnegotiable on the 
ground that their payment is made conditional 
on the construction of a railroad when issued to 
aid in its construction, where the language used 
imports not a condition, but a recital merely of 
the reasons influencing the contract. 

The question of the negotiability of municipal 
bonds, as well as the question of their validity, 
depends upon the constitutional and legislative 
authority for their issue, and on the compliance 
with the requirements of the law in their execu- 



COMMERCIAL LAW 55 

tion by the public officers charged therewith. 
Other classes of municipal securities are orders, 
warrants, and certificates of indebtedness. These 
ordinarily are not negotiable. Another class of 
quasi-municipal securities is county warrants. 
These are not negotiable in the sense of the law 
merchant. 

Coupons which promise payment to bearer are 
in legal effect promissory notes, and possess the 
attributes of negotiable paper. 

Government bonds payable to bearer, or other- 
wise negotiable in form, are negotiable instru- 
ments, and transferable as such. This has been 
held in the case of United States treasury notes, 
state bonds, coupons detached from government 
bonds, state endorsed negotiable railroad bonds. 

A stock certificate is not a negotiable instru- 
ment; nor a dividend warrant. 

BILLS OF EXCHANGE AND PROMISSORY 
NOTES. 

A bill of exchange is a written order or request 
by one person to another for the payment of 
money at a specified time absolutely and at all 
events. 

A promissory note is a written engagement 
by one person to pay another, therein named, 
absolutely and unconditionally a certain sum of 
money at a time specified therein. 



56 COMMERCIAL LAW 

Bills of exchange are either foreign or inland — 
the latter often called domestic, and both kinds 
indifferently alluded to as drafts. 

A foreign bill is one drawn in one state or 
country upon a foreign state or country, while 
inland or domestic bills are drawn and payable 
in the state or country whose jurisdiction is 
invoked. 

Technical Terms. The drawer of a bill of 
exchange is the person making it; the drawee, 
the person upon whom it is drawn ; and the person 
in whose favor it is, the payee. 

The same person may be drawer and drawee, 
or drawer and payee. The acceptance of a bill 
of exchange is the drawee's promise to "pay it 
according to its terms,' ' and upon making such 
promise the drawee becomes the acceptor. 

If the payee transfers the bill by indorsement 
he becomes an indorser, and one in no way con- 
nected with the bill originally may become liable 
as guarantor or surety by putting his name upon 
it, or make himself acceptor supra protest, by 
promising payment after the drawee has refused. 

The act of offering the bill for acceptance is 
called presentment; and refusal of acceptance or 
payment is dishonor, which is usually attested 
by protest, i. e., a formal notarial certificate 
attesting such dishonor. 

Notice (usually in writing) of dishonor is in 
most cases necessary to fix the liability of all 



COMMERCIAL LAW 57 

parties to a bill, and is often given by a notarial 
certificate contained in the protest and forwarded 
to the parties entitled to it. 

The maker of a promissory note is the person 
who gives it and the payee the one indicated as 
the recipient of the promised amount. 

Indorsement is the transfer of any negotiable 
instrument by a writing on the paper itself, or 
upon an attached piece of paper called an allonge. 
It may be either blank or full. The former is 
effected by the holder's merely writing his name, 
usually upon the back of the instrument to be 
transferred, while a full or special indorsement 
directs payment to the order of a particular 
person. 

An indorsement may be either absolute, e. g., 
"protest waived," or qualified, e. g., "without 
recourse"; conditional, ordering payment only 
upon a contingency, or restrictive as to the use 
to be made of the indorsed instrument, e. g., "pay 
A. to the use of B." 

Negotiation is the transfer of a bill or note in 
the manner prescribed by the law merchant. . 

Holder is a title applicable to anyone in actual 
or constructive possession of a note or bill, and 
entitled by law to sue and recover upon it. 

A bona-fide holder for value is a possessor of 
the negoti able paper in question, who has paid 
value for it without notice of any facts which, if 
known, would defeat his title to the note or bill. 



58 COMMERCIAL LAW 

An accommodation party to a note or bill is 
one who has signed as drawer, maker, indorser 
or acceptor, without receiving value, and for the 
purpose of lending his name to some other person 
as a means of credit. 

The maturity, or due date, of a note or bill is 
usually given by the text of the instrument; if 
payable on demand it is instantly due; except in 
some states, where by statute the maturity of 
such bills and notes is fixed at a certain number 
of months. 

Days of grace, usually three in number, are in 
most countries allowed by custom or statute as 
an addition to the time which the bill or note has 
to run according to its terms. Such days are 
now regarded as of right. 

Ee-exchange is the loss resulting from the 
dishonor of a bill of exchange in a country differ- 
ent from that in which it was drawn or indorsed, 
and is part of the damages recoverable by the 
holder of a dishonored bill. 

Requisites of Bills and Notes. A note or a bill 
must be in writing, but it is not necessary to use 
ink; a pencilled note is good. 

Signature, i. e., a person's name written by 
himself or with his authority, is in general neces- 
sary to the completeness of a note or bill. But 
the signature need not be full; initials are suf- 
ficient, and the mark of a person unable to write 
is good. The position of the signature is imma- 



COMMERCIAL LAW 59 

terial; the intent governs, and this intent may 
be proved by parol. The signatures of maker or 
drawer may even be on the back of the instru- 
ment, or upon an allonge attached to it. 

A date has been said to be necessary to the free 
and uninterrupted negotiability of a bill or note, 
but no date at all is necessary at common law. 
A date left blank may be filled up, and the note 
in this way even antedated by a bona-fide holder. 

Notes take effect only upon delivery, yet when 
payable so many days after date the time begins 
to run from the expressed date regardless of 
delivery; but the time of payment of such notes 
when no date is expressed is calculated from the 
day of delivery, as shown by parol evidence if 
necessary. The expressed date is prima facie 
evidence of delivery, but as between immediate 
parties it may be shown to have occurred on any 
other day. But as against an innocent holder 
for value the apparent date cannot be changed 
by parol to his disadvantage. Post- or ante- 
dating notes and bills throws no suspicion upon 
the good faith of the taker. 

The place at which a note or bill is dated is 
prima facie the place of residence of the drawer 
or maker. 

Indorsements are usually undated, but prima 
facie their date is that of the note or bill upon 
which they are made. The real date of the 



60 COMMERCIAL LAW 

indorsement may be proved by parol, as may 
also the real date of the acceptance. 

The alteration of a date, or of any other 
material part of a note or bill, avoids it. 

Although no set form of words is necessary. 
a note must in legal effect promise, and a bill 
order, the payment of money. Words of polite- 
ness, e. g., " Please let bearer have money," do 
not deprive the instrument of its commercial 
character. But a mere due bill or I. 0. U. is 
not a note, for it does not promise payment. 

Bills and notes to be negotiable must be pay- 
able at all events, and however valid as contracts, 
if their currency is clogged by conditions, the 
qualities of commercial instruments are denied 
them. A somewhat similar doctrine is held as to 
documents not clearly conditional, but so incum- 
bered with directions as to method of payment 
as to be clearly unsuited for business negotiation. 

As a general rule instruments made payable 
expressly or by implication out of a particular 
fund are not negotiable bills or notes, because 
their payment is conditioned upon the sufficiency 
of that fund. 

It is a well settled rule that money is the only 
thing that a note or bill may require payment of, 
unless this rule of the common law is changed 
by statute. Promises to pay in work or goods 
have therefore uniformly been held bad as prom- 



COMMERCIAL LAW 61 

issory notes ; though in .all other respects drawn 
in proper form. 

If it is impossible to extract from a note any 
statement of the time of its maturity, the instru- 
ment loses its - negotiable character. Bills and 
notes payable "on demand " are due immediately 
without grace, unless the rule is changed by 
statute. A note is valid though payable in 
installments. 

Though it is usual to express in a note or bill 
the place where payment is to be made, it is not 
by common law essential to the negotiability or 
completeness of the instrument. If, however, no 
place of payment is named, it is understood to 
be the place of residence of the maker or drawer, 
who is also liable at that place if default is made 
at the place named in the note or bill. 

It is necessary that a negotiable note or bill 
state with certainty the amount to be paid upon 
it. Thus a promise to account for proceeds is 
not a good note, nor an order for "whatever you 
may collect for me" a good bill. If, however, 
the amount to be paid can be certainly ascer- 
tained, it is enough, nor will mere clerical errors 
vitiate. 

Bills and notes, being merely written evidences 
of contracts, are in general governed by the law 
of the place where they are made, unless it is 
against the morals or policy of the forum to 
enforce such law. The liability of the maker of 



62 COMMERCIAL LAW 

a note or the drawer of a bill, the formalities 
attending the execution of either, and their valid- 
ity and effect when completed all depend upon 
the lex loci contractus. In like manner the law 
of the place of acceptance or indorsement governs 
the rights and liability of an acceptor or indorser. 

Manner of Execution. It must appear from 
the note or bill itself by whom the instrument is 
drawn or made; the usual and proper method of 
effecting this is by signature at the foot, but at 
common law signing, though in the body of the 
instrument, is enough. 

A partnership note should be signed by the 
firm name if the firm is to be bound ; if signed by 
the partners with their individual names it is no 
evidence of a partnership debt.- That the firm 
name does not contain all the partners' names 
makes no difference; all alike are bound. 

The general rule is that unless the principal 
for whom an agent acts appears upon the face of 
the instrument which the agent signs, the agent 
executing it will be held individually liable as 
upon his own contract, while the principal will 
not be liable, though he admits the agent's 
authority. If a note intended to bind a corpora- 
tion or association be signed with the principal's 
name, it is the contract of the principal, though 
the name of the agent also appear ; but the mere 
insertion of the principal's name either in the 
body of the instrument or the signature will not 



COMMERCIAL LAW 63 

make the contract even prima facie that of the 
principal. 

A note signed by several makers is a joint note 
unless otherwise indicated. 

While it is better to plainly name the payee of 
a note, if the person to whom the amount prom- 
ised is due can be learned it is enough. Notes 
and bills are often made payable to bearer or 
' 'A. B. or bearer." Such instruments are prima 
facie the property of the holder, are transferable 
by delivery, and if transferred by indorsement 
the indorsement need not be proved. That a 
payee's name is misspelled is immaterial, a^rid 
generally any misstatement of name may be 
corrected by parol. 

Negotiability and Manner of Transfer. In its 
proper commercial sense a negotiable instrument 
is one the assignee of which may bring action in 
his own name subject to no equities between prior 
parties. The customary way of indicating nego- 
tiability is by the words ' ' or order, " "or bearer. ' ' 
Notes payable to "A or bearer" are in most 
states transferable by delivery. 

The phrase "value received," usually found in 
bills and notes, imports a valid consideration; 
but unless required by statute, they may be 
omitted. 

The delivery of a note or bill containing blanks 
impliedly authorizes the holder to fill them as he 
pleases, unless restrained by the instrument 



64 COMMERCIAL LAW 

itself. And this authority extends to all parts of 
the document delivered. The power to fill blanks, 
however, does not extend to making additions or 
erasures. 

Delivery. A note or bill, however complete in 
appearance, takes effect only on delivery, and 
the same is true of indorsement and acceptance. 
While delivery will in general be presumed from 
possession, it is often a question of intent. Bills 
and notes, like other written contracts, take effect 
from the time of delivery only. A note or instru- 
ment made and delivered on Sunday is, like any 
other Sunday contract, void. But a note dated 
on Sunday may always be shown to have been 
delivered on a week day. 

Restrictions Upon the Right of Making Bills 
and Notes. Any person who can lawfully make 
a contract may make a note or draw a bill, and 
rules regulating the validity of contracts gen- 
erally are applicable to the interpretation of 
commercial paper. 

The property of idiots, imbeciles, lunatics, and 
even drunkards, is preserved by the doctrine of 
law which pronounces their contracts certainly 
voidable, and in some cases absolutely void. Gen- 
erally the contracts of a lunatic are voidable 
merely, but after inquisition duly found he can 
make no valid promise whatever. 

Drunkenness, unless of a kind far beyond occa- 
sional intoxication, is no defense to an action 



COMMERCIAL -LAW 65 

upon a bill or note. Where, however, the drunk- 
enness is excessive and absolute, so as to suspend 
the reason and create impotence of mind at the 
time of entering into the contract, the drunkard 
with returning reason may avoid the effect of his 
promise. The burden of proving drunkenness is 
on the party alleging it. 

For the advantage of the persons restrained 
infants and married women are generally in- 
capable of freely contracting and therefore of 
issuing valid and binding notes and bills, while 
corporations are subject to somewhat similar 
restraints, that their irresponsible power may be 
kept within limits. As to infants, the rule is that 
their notes are voidable only, and may therefore 
♦be either avoided or ratified. The acceptance of 
an infant is upon similar principles invalid. The 
indorsement of an infant is voidable. The de- 
fense of infancy is personal to the infant. No 
one but himself and his representatives can raise 
it. Though an infant may not make he may take 
and sue on a note. 

By common law the bill or note of a married 
woman is not merely voidable, but absolutely 
void. This rule has been somewhat relaxed in 
the United States by statute. No one but the 
woman herself or her representative can set up 
the defense of coverture, it being purely a 
personal incapacity. 

A corporation may receive notes and bills for 



6Q COMMERCIAL LAW 

debts due, and by consequence transfer them. 
But it cannot be incident or necessary to the busi- 
ness of a corporation to give accommodation 
paper; notes so given, therefore, are illegal and 
void. 

Execution or Transfer. No special form is 
necessary in appointing an agent to make and 
issue commercial paper. Under a general parol 
authority an agent may also indorse a bill or note. 
An agent who in pursuance of his duty indorses 
a note or bill cannot become liable thereby to his 
principal. Upon a note made by an agent with- 
out or in excess of authority the principal cannot 
be held. 

The general rule is that each partner in a mer- 
cantile firm has power to draw or make, transfer, 
and accept bills and notes in the firm name and 
about the firm business. As to indorsement the 
rule is the same. The powers of a partner do not 
extend to binding his firm by paper given or 
indorsed for the accommodation of others. The 
dissolution of a partnership in general terminates 
the power of the individuals composing it to bind 
one another. 

k note or bill given by an executor or admin- 
istrator does not bind the estate of his decedent ; 
such instruments are his individual acts, for 
which he is personally liable. 

Consideration Generally. In general every 
contract set forth in a note or bill, whether that 



COMMERCIAL LAW 67 

of the maker, indorser, drawer, acceptor or 
surety, requires a valid consideration to support 
it. The necessary consideration need not, how- 
ever, move solely to the party who is to be bound ; 
nor need it be given by the party originally prom- 
ising it. Where no fraud is alleged the adequacy 
or inadequacy of the consideration is perfectly 
immaterial. 

The ordinary consideration for notes and bills 
is an existing debt, or a loan made at the time of 
issuing the bill or note. It is obvious that the 
transfer of other things than money may lawfully 
move a man to execute a note or bill. Notes may 
be given for the transfer of personal property. 

It has been said that accommodation paper is 
without consideration. That no legal benefit or 
detriment inures to the accommodating party is 
true, and the consideration to support the con- 
tract must be found, if at all, among the other 
parties to the note or bill. As between the par- 
ties accommodated and accommodating, the latter 
can be under no liability to the former, whatever 
the relation in which they are placed on the 
paper; but as to third parties, any man who 
loans his credit on commercial paper must rest 
under the obligations of acceptor, indorser, etc., 
that he has himself assumed. But where an 
accommodation party is obliged to take up the 
note or bill he may recover from the persons 
accommodated by him the amount he has paid. 



68 COMMERCIAL LAW 

Before the paper passes into the hands of a 
holder for value the accommodation may be 
revoked by the party giving it. 

If the consideration of a note or bill be against 
public policy or in contravention of some express 
statute, the instrument is void between the par- 
ties. Notes given upon gambling considerations 
are void upon the broadest grounds of public 
policy. So also are notes given in restraint of 
trade. When part of the consideration is lawful 
and part illegal the whole instrument is in general 
void. 

Consideration may be wholly lacking for a 
note or bill, or it may fail either totally or par- 
tially. In each case a defense to the instrument 
is furnished, as against some at least of the par- 
ties to it. Such defenses are in general good 
between the original parties. But they are not 
admissible against a bona-fide holder for value 
before maturity, and without notice. ' 

Acceptance of Bills of Exchange. Although 
acceptance is in general the only means by- which 
the holder of a bill can gain any rights against 
the drawee, no presentment for that purpose is 
necessary upon bills payable upon demand or 
upon a day named. The usual and proper manner 
of making presentment is by exhibiting the bill 
and unequivocally demanding acceptance. The 
proper person to make presentment is the lawful 
holder or his agent, and the person to whom it 



COMMERCIAL LAW 69 

must be made the drawee or his agent. The time 
within which presentment must be made is said 
to be a reasonable time. The drawer himself or 
his authorized agent is the only person to give an 
acceptance. The reasonable time within which 
acceptance must be made after presentment is 
twenty-four hours. There is no special form of 
words necessary to create acceptance ; it may even 
be implied from the conduct of the drawee. The 
most common method is by writing the word 
"accepted" across the face of the bill. 

If absolute acceptance of a bill be refused, the 
holder may protest it; he cannot be compelled to 
accept a qualified or conditional acceptance. If 
he does so, he must notify all prior parties to 
the paper. 

By acceptance the drawee becomes, as to all 
parties other than the drawer, the principal 
debtor, and if his acceptance has been given for 
value, this is true even as to the drawer. Accept- 
ance is held to admit the genuineness of the 
drawer's signature and his right to draw the bill. 
But acceptance does not admit that the whole 
bill is genuine. A drawee, not being supposed to 
have the same familiarity with the signature of 
an indorser that he has with that of the drawer, 
does not by his acceptance admit the genuineness 
of an indorsement. An acceptance may be 
revoked at any time before delivery, but once 



70 COMMERCIAL LAW 

delivered it can be extinguished only by payment, 
or its equivalent. 

Indorsement. By the law merchant, indorse- 
ment is the only recognized method of transfer- 
ring title to bills and notes. 

Upon the death of the owner of a bill or note, 
the only joroper method of transferring title is 
by the indorsement of the executor or adminis- 
trator. An indorsement after maturity is equiva- 
lent to drawing a new bill payable on demand. 
To complete indorsement delivery is necessary; 
so also is a consideration. 

Indorsement is the writing of one's name upon 
a note or bill with intent to incur the liability of 
a party who warrants payment, provided it is 
duly presented to the principal at maturity not 
paid by him, and such failure is duly notified to 
the indorser. A blank indorsement which consists 
merely of the indorser 's name written upon the 
instrument renders it transferable by delivery, 
and confers the title and right to sue upon the 
holder, who may also fill the blank and make the 
indorsement special. 

Where an indorser regains possession of a 
note or bill, he can of course maintain no action 
against any prior party who could have sued him 
on his original indorsement. An ordinary method 
of transferring title without liability is by an 
indorsement "without recourse. " 

Whatever the interest of the indorser may be, 



COMMERCIAL LAW 71 

it is transferred by his indorsement to the in- 
dorsee. Indorsers are liable prima facie in the 
order in which they have signed, but this order 
may be varied even by parol. 

The distinguishing feature of the indorser 's 
liability is that it is contingent upon due present- 
ment for payment and notice of dishonor. The 
holder, therefore, is bound to make demand and 
give notice in order to hold any indorser to lia- 
bility, but it is not his duty to notify all the 
indorsers ; if he notify his own immediate indorser 
that is sufficient to hold the latter, who must pro- 
tect himself by notifying prior parties. Where 
the indorser receives due notice of dishonor it is 
his duty to pay the note or bill at once, and then 
proceed against parties prior to himself. The 
indorser, even after notice given, may be exoner- 
ated from all obligation to pay by the conduct of 
the holder, e. g., in giving to the maker a definite 
and binding extension of time wherein to pay. 

Bona-Fides. To constitute a bona-fide holder 
of a note or bill it must be obtained for value, 
before the real or apparent maturity of the paper, 
and in due course of business and in good faith. 
It follows therefore that one may be a bona-fide 
holder, despite bad faith on the part of his 
indorser. To make one a bona-fide holder 
indorsement is necessary, unless the paper is 
transferable by mere delivery. 

Maturity. When no time is specified at which 



72 COMMERCIAL LAW 

a note or bill is to mature, it is considered to be 
payable on demand. A demand note is payable 
instantly, bnt for purposes of transfer its ma- 
turity does not occur until a reasonable time after 
its date. Paper transferred after maturity be- 
comes thereby due on demand in a reasonable 
time. 

Demand. The drawer of a bill or indorser of 
a bill or note is in general liable only after a 
formal demand of payment made upon the ac- 
ceptor or maker. Failure to make demand gives 
rise to a presumption of injury to the indorser 
or drawer, which is not rebutted even by proof 
that he is solvent and uninjured. But as against 
acceptor or maker no demand is necessary; suit 
is a sufficient demand. 

Either the holder of a bill or note or his law- 
fully authorized agent may make presentment for 
payment. 

So far as the maker or acceptor are concerned, 
a demand may be made at any time before suit> 
but drawers or-indorsers are entitled to have a 
demand made on the day of maturity. A demand 
before maturity is ineifectual for any purpose; 
while delay in making it, without excuse or waiver, 
discharges drawers and indorsers. 

If a bill or note to be presented names a place 
of payment, demand at that place is always suf- 
ficient. Where no place for presentment is speci- 



COMMERCIAL LAW 73 

fied, personal demand upon the maker or acceptor 
is always good as against all parties. 

Protest. The solemn declaration on the part 
of the holder of a bill of exchange against any loss 
sustained by him by reason of non-payment or 
non-acceptance of the bill in question is known 
as protest. The proper person to make the pro- 
test is the notary who presented the bill, but if 
no notary is obtainable, any private person of 
the place of dishonor, which should be the place 
of protest, may draw it up. 

The act of protesting is said to comprise three 
steps: (1) presentment and demand; (2) noting; 
and (3) extending the protest. The completed 
protest is authenticated by the signature and seal 
of the notary. 

Notice of Dishonor. When acceptance of a bill 
or payment of either a bill or note has been 
refused, though protest has been made or noted, 
the liability of the drawer or indorser is generally 
not complete unless notice of dishonor is sent to 
him. If this notice is neglected the indorser or 
drawer is discharged, even if they are accommo- 
dation parties. 

The sufficiency of the notice sent is determined 
by the law of the place of payment, if such place 
is specified in the instrument dishonored. If it 
is not mentioned, the law of the place of indorse- 
ment governs. 

Notice of dishonor may always be given by the 



74 COMMERCIAL LAW 

lawful holder of the note or bill in question, and 
when several persons are joint holders, any one 
of them may give notice. It is the duty of every 
party, upon receiving notice, to himself notify his 
own indorser without delay. Notice must be given 
to all parties to whom the holder looks for pay- 
ment, but he need not give notice to any other 
person. If he fails to give notice to any indorser, 
he thereby discharges all prior parties, unless 
they receive due notice from some other party. 

The time when an indorser was notified should 
be stated in an action against him. It is generally 
said that a holder is allowed a reasonable time 
within which to give notice to his' indorser. Each 
indorser upon whom notice has been served has 
a day after its receipt within which to notify par- 
ties prior to himself. If notice is served at an 
indorser 's office, it must be done during business 
hours ; if at his residence, at any reasonable hour 
before the house closes for the night. 

"Where notice is sent by mail, if it is posted on 
the day after dishonor or receipt, in time to go by 
a mail of that day which leaves within a reason- 
able time after the beginning of business hours, 
it is sufficient. 

Notice may be served either at the residence 
or office of an indorser. If the notice is sent by 
mail, addressing it to the postoffice of the town in 
which he resides is enough; in general the address 
should be to the postoffice nearest the indorser 's 



COMMERCIAL LAW 75 

home. Notice sent to an indorser at his residence 
during his temporary absence is good. 

Notice may be served personally by leaving it 
at the indorser 's or drawer's residence or office, 
by mail or special messenger; and if it is duly 
received, the particular method employed is 
wholly immaterial. 

As between persons living in different places, 
mailing is the usual and proper method. An 
indorser or drawer living in the place where the 
bill or note is protested or made payable is, how- 
ever, entitled to personal notice; the mail cannot 
be used except by statute. 

But where there are several postoffices in the 
same town or city, notice may be sent by mail. 

Delay in making demand or giving notice may 
be excused by any circumstances over which the 
holder has no control, and which therefore cannot 
foe attributed to his negligence. An express 
waiver of demand and notice made by the indorser 
in his indorsement is usual and valid, but waiver 
may also be inferred from a promise to pay made 
with full knowledge of facts amounting to a 
discharge. 

Checks. A check differs from an ordinary bill 
of exchange only in two respects ; first, it must be 
drawn on a bank; secondly, it must be payable 
on demand. No delay in the presentment of a 
check will discharge the drawer from his obliga- 
tion, unless, and only so far as, he has been 



76 COMMERCIAL LAW 

actually prejudiced by the delay, as by the failure 
of the bank with funds of his in its possession. 
In other respects the liability of the drawer of a 
check is coextensive with that of the drawer of 
any other bill of exchange. 

A check being a bill of exchange, and not an 
assignment of a specific fund, confers no right of 
action upon the holder against the drawee. By 
custom, a bank having funds of a customer is 
bound to honor his checks to the amount of those 
funds. 

The liability of the indorser of a check, whether 
payable to order or to bearer, is the same as that 
of an indorser of any other bill of exchange. 

A check is not presentable for acceptance. A 
certified check, it is true, has sometimes been 
spoken of as an accepted bill. A check, however, 
after certification, ceases to be a bill at all; it is 
transformed into a certificate of deposit, i. e., a 
promissory note. The certification of a check is 
not, like the acceptance of a bill, an added obliga- 
tion, but; a substituted obligation. The legal effect 
of the certification of a check is the same as would 
be produced if the holder were to surrender the 
check to the bank and receive therefor the note 
or certificate of deposit of the bank, payable on 
demand. Accordingly the holder of a certified 
check has no recourse to the drawer upon the 
bank's failure to pay; and the drawer has after 



COMMERCIAL LAW 77 

certification no power to countermand the pay- 
ment of the check. 

No laches is imputable to the holder for delay- 
ing presentment of a certified check, inasmuch 
as the certifying bank continues indefinitely liable 
thereupon, as upon a bank note. 

The transfer of a certified check, payable to 
bearer, by a thief, like the transfer of a bank note, 
will give a purchaser for value without notice a 
good title. A certified check being in effect a bank 
note, it is obvious that the certification must be 
• in writing. The certification is commonly in the 
form of the word "good." 



PRINCIPAL AND AGENT. 

An agent is a person duly authorized to act 
on behalf of another, or one whose unauthorized 
act has been duly ratified. 

Who May Be Principal. It may be laid down 
generally that any person sui juris, unless pro- 
hibited by law to which he is subject, may be a 
principal; but persons who are neither naturally 
nor legally sui juris are, as a rule, incompetent 
to act as principals and to appoint agents. 

Infants, married women and aliens are legally 
not sui juris and are incompetent to appoint 
agents except as authorized by statute. Persons 
naturally incompetent to appoint agents are luna- 
tics, idiots, drunkards, etc. Corporations, being 
mere artificial creations, cannot act except 
through the instrumentality of an agent or attor- 
ney. They therefore must be principals. 

Who May Be Agents. Agents are not required 
to possess the same qualifications as principals, 
and it may be laid down as a general rule that all 
persons of sane mind are capable of becoming 
agents . 

The only disqualification which seems to exist 
78 



COMMERCIAL LAW' 79 

to prevent a person from becoming an agent is 
the fact that he has interests adverse to those 
created by the agency; or that he has already an 
agency which is incompatible with the new agency. 
Two or more parties may be appointed as agents 
for the same matter. 

Appointment. There must be an appointment 
to constitute one an agent. It is a rule of law that 
no one can become an agent except by the will of 
the principal. 

The appointment may be under seal, in writing, 
or verbal, or may be implied from the fact that a 
person is placed in a situation in which, accord- 
ing to ordinary usage, he would be understood 
to represent and act for another. 

It is a maxim of the common law that an 
authority to execute a deed or instrument under 
seal must be conferred by an instrument under 
seal. 

The facts from which an agency may be im- 
plied must be sufficiently distinct to leave no 
doubt about the intention of the party appointing. 

Class of Agents. According to the nature and 
extent of the authority delegated to them, and 
the end sought to be accomplished by their ap- 
pointment, agents are divided into several classes, 
and their duties and liabilities vary with the 
extent of the authority conferred and the objects 
for which they are appointed. According to the 
character of their employment and the object of 



80 COMMERCIAL LAW 

their appointment they are called brokers — viz., 
stock brokers, exchange and money brokers, real 
estate and insurance brokers, ship brokers, mer- 
chandise brokers, etc.; auctioneers; commission 
agents or factors; commercial travelers or drum- 
mers; clerks; mercantile agencies; ship-masters; 
ship-husbands; attorneys at law and in fact; 
public agents or officers. 

General and Special Agents. An authority is 
as to its extent either general or special. General 
authority is authority to act in a certain char- 
acter, and unless it is restricted to a smaller 
limit, and the restriction is known or ought to be 
known to third parties, carries with it all the 
ordinary powers incident to that character. It is 
a delegation to do all acts connected with a par- 
ticular trade, business, or employment. 

A special agent is one whose authority is con- 
fined to a particular or individual instance, but 
in another sense it may be said that every express 
agency is special, because it specifies what is to 
be done. 

General agents are to be carefully distin- 
guished from universal agents; that is, from 
agents who may be appointed to do all the acts 
which the principal can personally perform, and 
which he may legally delegate the power to 
another to do. 

An agent acting under a general authority binds 
his principal by any act done within the scope of 



COMMERCIAL LAW 81 

his employment, even if done against instruc- 
tions. Secret instructions cannot affect third par- 
ties dealing with the agent. The authority of a 
supposed agent cannot be established by his own 
declarations. 

The principal of a special agent is only bound 
by acts of the agent which are strictly in accord- 
ance with his authority, and a third party is 
bound at his peril to ascertain the limit of the 
authority. In case of special agency the principal 
will be bound to the extent of the authority he has 
held out to the world as given to the agent. This 
will be the test of the principal's responsibility, 
both in general and special agencies. 

There is a distinction to be observed between 
the authority of a special agent, which the person 
dealing with him not only has a right but is bound 
to know, and the private instructions given him 
respecting the mode and manner of executing his 
agency, intended to be kept secret and not com- 
municated to those with whom he may deal, con- 
cerning which it would of course be useless to 
inquire. Such private instructions are not to be 
regarded as limitations upon his authority; and 
notwithstanding he may disregard them, his act, 
if otherwise within the scope of his agency, will 
be valid and binding upon his employer. 

The power to sell does not necessarily imply a 
power to collect, unless the agent is intrusted with 
the delivery of the goods, or unless there are other 



82 COMMERCIAL LAW 

circumstances from which such power can be im- 
plied. When the goods sold are in the hands of 
the agent and delivered by him, a power to receive 
payment is generally implied. Where an agent 
is authorized to sell and to collect he must follow 
his instructions, and if so instructed must receive 
his payment in cash. No other mode of payment 
will be implied. 

A general agent appointed to sell merchandise 
has, according to usage, power to warrant the 
quality of the article sold, but a person not the 
general agent of the principal, who has the naked 
power to sell a chattel, has no such authority. 
An agent empowered to sell may rescind a sale or 
make a different one. Authority to sell at once 
at a certain price does not imply a power to sell 
for the same price at a subsequent time. Power 
to sell does not authorize an agent to sell on 
credit. 

Authority to sell land authorizes the agent to 
execute all instruments necessary to complete. the 
sale. 

A station agent authorized to receive and for- 
ward freight may contract to supply cars ; but he 
has no implied power to contract to furnish cars 
at other stations than his own, and authority to 
solicit passengers does not imply power to solicit 
or receive freight. An engineer in the employ of 
a railroad corporation has no power to bind the 



COMMERCIAL LAW 83 

company by his contracts unless he is specially 
authorized. 

One employed to ship goods may make a rea- 
sonable contract limiting carriers' liabilities. 

An agent with power to conduct a business has 
authority to do everything necessary or proper 
and usual in the ordinary course of the business. 
Authority to employ an agent or servant includes, 
in the absence of restrictive words, authority to 
make a complete contract, definite as to the 
amount of wages, as to all other terms. The 
business manager of a manufacturing corporation 
has implied power to employ surgical aid for an 
injured employe. 

Power to purchase implies power to purchase 
on credit, if the agent is not supplied with funds. 
A general power to loan money authorizes an ex- 
tension in time of payment, and a general power 
to borrow money includes authority to give the 
lender the ordinary securities for the sum 
borrowed. 

A power to mortgage does not authorize the 
agent to mortgage the property for his own bene- 
fit, nor that of a third party. Authority to inves- 
tigate the affairs and accounts of a corporation 
implies power to employ expert assistance. But 
authority to perform and carry out a contract 
does not imply a power to change it. 

Duties of Agents. When an agent has under- 
taken to execute a commission for a valuable con- 



84 COMMERCIAL LAW 

sideration, he binds himself* to perform it, and 
will be liable for its performance in the absence 
of a fresh contract releasing him, unless the argu- 
ment is either illegal, immoral, or absolutely 
impossible. 

In so far as he undertakes to act as agent, he 
undertakes to represent the principal only. An 
agent who has a bare power or authority must 
execute it himself and cannot delegate his 
authority to another. The principal may, how- 
ever, give the agent the power of substitution, 
either expressly with the appointment, or by 
ratification or acquiescence when the agent has 
delegated his power without authority. 

An agent is bound to follow faithfully the 
instructions of his principal, and to act within 
the scope of his authority. "Where an agent is 
commissioned to do any act, nothing being said 
as to the mode of performance, he will have an 
implied power to perform his duties in accord- 
ance with any recognized usage or mode of 
dealing. 

The agent is understood to contract for reason- 
able skill and ordinary diligence, and he is con- 
sequently liable to the employer for injuries occa- 
sioned by want of reasonable skill, and also for 
ordinary negligence. By reasonable skill we are 
to understand such as is, and no more than is, 
ordinarily possessed and employed by persons 
of common capacity engaged in the same trade, 



COMMERCIAL .LAW 85 

business or employment; by ordinary diligence, 
that degree of diligence which persons of com- 
mon prudence are accustomed to use about their 
own business and affairs. 

An agent will not be allowed to place himself 
in a position in which his duty and interest con- 
flict, or to be permitted to make a secret profit 
out of his agency. The same rule holds good for 
officers of a corporation, although representing 
a majority of the stock; they may not deal with 
themselves to the detriment of the other stock- 
holders for whom they are acting. 

Whenever one person is placed in such relation 
to another by the act or consent of that other, or 
the act of a third person, or of the law, that he 
becomes interested for him, or interested with 
him, in any subject of property or business, he is 
prohibited from acquiring rights in that subject 
antagonistic to the person with whose interests 
he has become associated. A person acting as 
purchasing agent for another cannot buy his own 
property for his principal. An agent with power 
to sell cannot himself become the purchaser of his 
principal's property. An agent may, however, 
buy directly from a principal who acts with full 
knowledge, and when there is no concealment or 
deception on the part of the agent. An agent 
with power to buy may not purchase for himself. 

All the profits an agent may make out of the 
subject-matter of the agency belong to the prin- 



86 COMMERCIAL LAW 

cipal. An agent to buy or sell may make no profit 
ont of the purchases or sales. 

An agent cannot make a valid contract where 
in the same transaction he acts as agent for both 
parties. But where each of the principals con- 
sents or has notice that the agent acts in a dual 
capacity, the disability will be waived. 

An agent is bound to account to his principal 
for money received by him in the course of his 
agency for goods sold by his principal on orders 
obtained by him as such agent on commission, 
although such sales as between the principal and 
purchaser be illegal and void. And it is his duty 
to keep regular accounts of all of his transactions, 
with suitable vouchers. 

In all cases it is the duty of an agent to keep 
the property of his principal separate from his 
own and not to mix it with the latter, and if he 
does not keep it separate from his own and after- 
wards is unable to distinguish between the one 
and the other, the whole will be adjudged to 
belong to the principal. 

Signatures by Agents. No particular form 
of words is necessary for an agent to bind his 
principal, if he expresses in the instrument the 
capacity in which he acts. Where this intent 
appears, the signature may be "A" as agent for 
"B". A deed will bind the principal if signed 
and sealed in his name and on his behalf. The 
seal must be the seal of the principal and not the 



COMMERCIAL LAW 87 

seal of the agent, to make the principal liable, 
whether the principal be a corporation or an indi- 
vidual. Where an agent signs his own name and 
uses his own seal the principal will not be bound. 
If it does not appear from the instrument that 
it is intended to be the act of the principal, the 
agent will be personally liable, and the addition 
to his name of his title of office, or his representa- 
tive character, will not shield him from liability. 

Where the name of the principal appears on 
the face of a negotiable instrument, an indorse- 
ment by an authorized agent with the descriptive 
words " Treasurer,' ' " President/ ' " Agent,'' etc., 
will be a sufficient indorsement to bind the prin- 
cipal. But adding the title " agent" to the signa- 
ture of the drawer of a bill is notice that the 
party does not mean to be personally liable, and 
where the principal is known he alone is liable. 
This is especially the case where the agent has 
been in the constant habit of signing negotiable 
paper for his principal in this manner, and this 
fact is known to the parties holding the paper. 

When a simple contract, other than a bill or 
note, is made by an agent in his own name, 
whether he describes himself as agent or not, 
whether the principal be known or unknown, he, 
the agent, will be liable to be sued, and entitled to 
sue thereon; and his principal will also be liable 
to be sued and be entitled to sue thereon in all 
cases. 



88 COMMERCIAL LAW 

Sub-Agents. Where an agent has authority to 
employ sub-agents, he will not be liable for the 
negligence or misconduct of his sub-agent ; he will 
be liable, however, for negligence or fraud in the 
appointment. The rule that agents must account 
to their principals for all moneys received by 
them for their principals applies to sub-agents. 
They are, however, exclusively accountable to 
their immediate principal, the agent. The sub- 
agent can look for his compensation only to his 
immediate employe. 

Duties of Principal as to Agents. Ordinarily 
an agent performing services for his principal is 
entitled to a compensation therefor, unless he- is 
a mere gratuitous agent or mandatary. The com- 
pensation may consist of a fixed sum for a specific 
period of time (salary), which sum cannot ba 
increased by proof of extra work; or of a sum 
varying with the amount of the services rendered 
(commission). 

A del credere commission is an additional com- 
mission paid to an agent who undertakes to guar- 
antee to his principal the payment of the debt 
due by the buyer. 

An agent will not be allowed to enforce com- 
pensation for services of an illegal character. 
Where an agent is unfaithful to his trust and 
abuses the confidence imposed in him by his prin- 
cipal, or where he misconducts himself in the 
business of his agency, he may be deprived of 



COMMERCIAL LAW 89 

commission and compensation. Also where he 
engages in transactions by which he acquires in- 
terests or employment adverse to the interests of 
his principal; or fails to render accounts as 
directed; or mixes his principal's property with 
his own, so that it cannot be distinguished. 

It is a rule of law that the principal is bound 
to indemnify the agent against the consequences 
of all acts done by him in pursuance of the au- 
thority conferred upon him. Generally it is the 
right of an agent to be reimbursed for all his 
advances, expenses, and disbursements made, in 
the course of the agency, on account of or for the 
benefit of his principal. 

Liability of Agents to Third Parties. A duly 
authorized agent acting in behalf of his principal 
is not personally responsible on the contract when 
the third party knows that he acts in the name 
and in behalf of the principal. But whenever a 
party undertakes to do an act as the agent of 
another, if he does not possess any authority from 
the principal therefor, or if he exceeds the au- 
thority delegated to him, he will be personally 
responsible therefor to the person with whom 
he is dealing for or on account of his principal. 

Where an agent in his dealings with third par- 
ties does not disclose his principal he will be per- 
sonally liable to the contract. When an agent 
pledges his own credit, either expressly or im- 
pliedly, he will be bound himself. 



90 COMMERCIAL LAW 

A public officer acting for his government and 
within the scope of his authority is not personally 
liable on contracts entered into with third parties. 

An agent to whom money has been mispaid for 
the use of his principal is not personally liable to 
the person who makes the payment, where he 
has paid over the money to his principal without 
notice. 

An agent is generally not liable to third par- 
ties for acts of negligence, nor for non-perform- 
ance of duty. As such he is only responsible to 
his principal, and the principal to the third party. 
But he is personally liable to third parties for 
misfeasance ; for doing something which he ought 
not to have done. 

When a principal engages an agent to do a 
certain work and to take entire control over it, 
while the principal does not interfere, but leaves 
it entirely with the agent, the agent and not the 
principal will be liable to third parties for in- 
juries or damages sustained by the negligence 
or unskillful manner in which the work is done. 

Agents are always personally liable to injured 
third parties for fraudulent or malicious* acts 
done in their principal's service, or for willful 
deceit. 

Agents who have taken control of certain work 
for their principals, and have engaged to finish it, 
are liable to third persons for torts committed by 
those they employ. 



COMMERCIAL LAW 91 

Rights of Agents Against Third Parties. Ordi- 
narily an agent contracting in the name of his 
principal and not in his own name is not entitled 
to sne ; nor can he be sned on such contracts. But 
where the agent acts in his own name without 
disclosing his principal, being personally liable, 
upon the contract, it is evident that he can sue on 
it, although the principal may be also sued if 
discovered. 

Where an agent, although acting as agent, 
makes a contract in his own name, and the con- 
tract shows on its face to have been made per- 
sonally with him, he will have a right to sue on it ; 
as where a promissory note for the benefit of the 
principal is expressly made payable to the agent. 

Liabilities of Principals to Third Parties. A 
principal is liable to third parties for whatever 
the agent does or says ; whether for contracts, rep- 
resentations, or admissions he makes; whatever 
negligence he is guilty of, and whatever fraud or 
wrong he commits ; provided the agent acts within 
the scope of his apparent authority, and provided 
a liability would attach to the principal if he was 
in the place of the agent. The existence of the 
agency must, however, be clearly shown to make 
the principal liable. It does not matter that the 
agent exceeds his authority. 

Where an agent contracts in his own name and 
does not disclose his principal, having a right to 
sue, he is also, when discovered, liable to a third 



92 COMMERCIAL LAW 

party on the contract. The third party may elect 
whom he will sue. And the same rule holds good 
when the agent discloses his principal at the time. 
After a third party has elected whom to sue, and 
has sued either the agent or the principal to judg- 
ment, he cannot after that sue the other. 

Principals, whether individuals or corpora- 
tions, are as a rule, civilly though not criminally 
liable to third persons for the fraud and deceit 
of their agents when committed in the course of 
the principal's business. The deceit or fraud, to 
make the principal liable on it, must have 
been committed in the course of the agent's 
employment. 

As a rule a principal is liable for the result of 
acts of negligence of his agent, when he is acting 
within the scope of his authority; but he is 
not when he is not acting within the scope of 
his employment. 

Notice to Agent Is Notice to Principal. In the 
relation of the principal to a third party the 
undisputed rule exists, that notice to the agent is 
notice to the principal, if the agent comes to the 
knowledge of the facts while he is acting for the 
principal. But notice to the agent to bind the 
principal must be within the scope of the agent's 
employment. If an agent should collude with a 
third party to defraud the principal, the latter 
will not be responsible for knowledge of the agent 
in relation to such fraud. 



COMMERCIAL LAW 93 

Bights of Principals Against Third Parties. 
Those acts or contracts of an agent which render 
the principal liable to third parties impose on 
the third parties themselves a reciprocal obliga- 
tion to the principal, and as the principal is liable 
to the burden of such acts or contracts, whether 
the agent had authority originally or his acts have 
been duly ratified, so he is entitled to the rights 
and benefits arising from such contracts and 
may enforce these rights by action. And it 
does not matter whether the principal is disclosed 
or not, nor that the agent in the transaction was 
considered to be the principal. Where a principal 
has been defrauded by his agent, as by an illegal 
sale, the principal may follow and recover Iris 
property or the proceeds thereof, even in the 
hands of third parties, unless such party be a 
bona fide purchaser for value and without notice. 

Eights of Agent Against Principal. In cases 
of agency there generally exists a particular right 
of lien in the agent for all his commissions, ex- 
penditures, advances and services in and about 
the property or thing intrusted to his agency, 
whenever they were proper or necessary or inci- 
dent thereto. 

Ratification. An unauthorized act by one as- 
suming to be an agent for another may be ratified 
by the principal, and such ratification gives to the 
act the same effect as if it were previously duly 
authorized. This applies to corporations as well 



94 COMMERCIAL LAW 

as individuals. The act to be ratified must be 
voidable merely and not absolutely void. A rati- 
fication is only effectual when the act is done by a 
person professedly acting as the agent of the 
party sought to be charged as principal. 

The person who undertakes to ratify must do so 
with a knowledge of all material circumstances, or 
with an intent to take all liability without such 
knowledge. One cannot be liable as for the ratifi- 
cation of a tort that was not committed in his in- 
terest. There can be no ratification of a part 
only of a transaction. 

The form of a ratification should be the same as 
required for the original appointment. The rati- 
fication must refer to the precise act to be ratified. 
A ratification may be implied, as from the princi- 
pal 's acts ; but implied ratifications extend only to 
such acts of the agent as are known to the princi- 
pal at the time they are made. The acts of the 
principal must, however, show a clear intention to 
ratify the unauthorized acts of the agent, and 
must be inconsistent with a different intention. 

A principal is bound to disavow the unauthor- 
ized act of his agent within a reasonable time 
after the facts come to his knowledge. In order 
to make the principal liable for not promptly dis- 
avowing unauthorized acts of his agent, he must 
have full notice of such acts. 

Termination of Agency. Where an express 
argument exists limiting the agency either to some 



COMMERCIAL LAW 95 

definite object, or for some definite time, as, for 
instance, where a man is authorized to buy" a quan- 
tity of merchandise according to sample, or to 
buy generally for a year, there being at the same 
time a condition that the employment shall con- 
tinue in one case until the merchandise has been 
bought, and in the other until the year has ex- 
pired, the agency will be dissolved in due course 
by the happening of these results respectively. 

A principal who employs an agent may revoke 
the appointment at any time. The revocation of 
an agency by the principal need not be expressed 
in words. It may be implied from his acts. 

An agent can terminate the agency at any time ; 
but if the agency has been undertaken for a valu- 
able consideration he will be liable in damages to 
his principal, and in many cases he will be re- 
quired to give reasonable notice. 

As a general rule any naked power is revocable, 
and even an express declaration that it is irre- 
vocable will not prevent its revocation. If the 
power is coupled with a vested interest it cannot 
be revoked. But the interest must be in the sub- 
ject-matter of the agency itself ; an interest in the, 
proceeds to arise as compensation for executing 
the power will not make it irrevocable. When an 
agency is conferred for a valuable consideration 
it is irrevocable. 

Death of either principal or agent instantly 
ends the agency as regards all parties, unless the 



96 COMMERCIAL LAW 

agency is coupled with an interest. The death of 
the agent extinguishes his power and revokes the 
power of his sub-agent. 

The bankruptcy of a principal or an agent re>- 
vokes the agent's authority when not coupled with 
an interest. Dissolution of a partnership works 
a revocation of an agency therefor. 

Acts of an agent done after the revocation of 
his agency bind both his principal and himself, so 
far as they regard third persons who have had no 
notice of the revocation. 



INSUBANCE. 

Insurance in its most general sense is a con- 
tract whereby one party agrees to indemnify an- 
other in case he shall suffer loss in respect of a 
specified subject by a specified peril. 

The Contract. The written contract between 
the parties expressing the terms of the insurance 
is called the policy. But in the absence of posi- 
tive law or a charter provision to the contrary, 
there is nothing requiring the contract to be in 
writing. It is, however, the universal practice to 
reduce the contract to a generally accepted form. 

When the policy is issued by the company and 
accepted by the insured, its terms fix the rights 
and determine the obligations between the parties. 
Payment of the premiums and delivery of the 
policy are presumed by law to be concurrent. 
Therefore, when the premium has not been paid, 
nor the policy delivered, the contract is prima 
facie incomplete. It is commonly provided in the 
policy that it shall be countersigned by the agent. 
And where this is the case, it is usually consid- 
ered invalid without it, even where it is in favor 
of the agent. 

97 



98 CO M M EEC IAL LAW 

The construction of policies of insurance does 
not differ in principle from that of other con- 
tracts. The written and printed portions of a 
policy are given equal effect where they 
are not in conflict, but where they conflict, 
the written portion controls. In case of a special 
clause conflicting with a general one, the former 
governs. 

Warranties. A warranty, in the law of insur- 
ance, is a statement or stipulation inserted or re- 
ferred to in, and made a part of, the policy, upon 
the truth or performance of which, on the part of 
the insured, the validity of the contract depends. 
No particular form or set of words is essential to 
constitute a warranty. However, if it clearly ap- 
pears from the instrument that a statement or 
stipulation inserted was not intended to operate 
as a warranty, it will not be given that effect. 

The effect of a warranty is to make void the pol- 
icy if the statements made are not literally true, or 
if the stipulations adopted are not fully observed, 
without regard to their actual materiality. War- 
ranties are affirmative or promissory. An affirm- 
ative warranty is one which affirms the existence 
of certain facts at the time of the insurance. A 
promissory warranty is one which requires the 
performance or omission of certain things, or the 
existence of certain facts after the taking out of 
the insurance. 

Statements contained in the application are not 



COMMERCIAL LAW 99 

warranties unless made a part of the policy. In 
case of doubt as to whether a statement or stipu- 
lation is a warranty, or merely a representation, 
the latter construction will be given. 

The omission of the applicant to answer certain 
questions in the application is not a warranty 
that there is no answer to make, nor is a partial 
answer a warranty beyond what is stated. The 
issuance of the policy on such an application is a 
waiver of a failure to answer, or to answer fully. 

It is usually warranted by the applicant for life 
insurance that he is of correct and temperate hab- 
its. This refers to the habits of the insured as 
to the use of intoxicating liquors, and not to occa- 
sional practices ; and if his usual and general hab- 
its were to abstain, or to use in mo deration, an 
occasional indulgence to excess would not be a 
breach. 

Representations. A representation, in the law 
of insurance, is an incidental statement or repre- 
sentation made by the insured with regard to 
some feature of the risk upon the faith of which 
the contract is entered into. It is not a part of 
the contract, and need not be literally, though it 
must be substantially true. It differs further 
from a warranty in that to avoid the policy in case 
of its falsity it must be of facts material to the 
risk, and must be either wilfully false or grossly 
negligent in character. 

Eepresentations are affirmative and promis- 



100 COMMERCIAL LAW 

sory. Affirmative representations are those which 
affirm the existence of certain facts pertaining to 
the risk at the time the contract is entered into. 
Promissory representations are those with re- 
gard to the existence of certain facts after the 
making of the contract. A representation, to viti- 
ate the policy, need not be false in toto. If untrue 
in a material part it will have this effect where 
the contract is entire and indivisible. 

Where the application for insurance is made in 
writing, oral representations cannot be shown; 
for in that case it is presumed that all such were 
incorporated into the writing. 

A frequent provision is that any fraud or false 
swearing by the insured shall forfeit the insur- 
ance. This means intentional fraud and false 
swearing, regarding a material matter. 

Concealment. A concealment is the intentional 
withholding by the insured from the insurers of 
facts material and prejudicial to the risk which 
ought in good faith to be made known, and its 
effect is to vitiate the policy. It is the opposite 
of a representation. It is not stating facts which 
ought to be stated, and of which the insured has 
knowledge. The element of knowledge on the 
part of the insured is important, for a conceal- 
ment cannot be intentional without it. But where 
the facts undisclosed are within the knowledge of 
the insurers, or ought to be, or where they better 
the risk, it is not a concealment to fail to mention 



COMMERCIAL LAW "101 

them, although the insured may know of them, un- 
less it is otherwise provided in the policy. 

It has been stated that the insured must have 
had knowledge of the facts to constitute the with- 
holding of them a concealment. "Whether or not 
he has such knowledge is a question of fact for the 
jury; but he must be presumed to have such 
knowledge as a reasonable man or one of ordinary 
capacity would or ought to possess under the cir- 
cumstances. 

If the answers of the insured to the questions 
put to him are full and fair, as he understands 
them, and has a right to understand them, it is 
sufficient. 

Premium. The premium is the consideration 
paid for the insurance. Its payment and delivery 
of the policy are usually concurrent acts. But 
while there must be a promise to pay a sum of 
money or some other consideration to support an 
undertaking to insure, still the efficacy of the con- 
tract does not depend upon the payment of the 
premium at the time of the delivery of the policy 
or other time agreed upon, unless it be otherwise 
manifested. However, it is now usually provided 
that the policy shall not be binding until the pre- 
mium is paid, though the policy may be delivered. 
So where the premium is payable in instalments, 
and it is provided that the policy shall not be bind- 
ing while an instalment remains due and unpaid ; 
the nonpayment of an instalment when due sus- 



102 COMMERCIAL LAW 

pends the policy until paid, and a loss occurring in 
the meantime is not therefore covered. 

What are termed nonforfeitable or paid up poli- 
cies are frequently issued, particularly in life in- 
surance. They are usually indorsed "nonforfeit- 
ing policy, ' ' and commonly provide that if on the 
payment of a specified number of premiums the 
policy shall cease by reason of the nonpayment of 
subsequent premiums, a new paid up policy will 
be issued for such sum as is proportionate with 
the annual payments which have been made, on 
compliance with certain conditions by the insured, 
usually that he shall return the original policy 
within a fixed time for such purpose ; also that if 
the premiums shall not be paid, the insurers will 
be liable for so much of the loss as is proportion- 
ate with the annual payments made. 

The mode of payment of the premium is imma- 
terial if it is accepted by the company or its agent, 
and no special mode be provided for. And it is 
generally considered that where the insured has 
money to his credit with the insurers that that 
must be exhausted before the policy can be de- 
clared forfeited for nonpayment. The premium 
must be paid promptly on the day named unless 
the policy promises indulgence. 

Payment of the premium at the time agreed 
may be waived by the insurers after the policy 
takes effect, and this either expressly or im- 
pliedly, and hence by parol as well as by writing. 



COMMERCIAL LAWi 103 

Any acts of the insurers which, reasonably indi- 
cate that they do not mean to insist npon compli- 
ance will imply a waiver. And the prompt pay- 
ment of an instalment may be waived as well as 
where the whole premium is due at one time. Ac- 
ceptance of an instalment or a part thereof, after 
it is due, or an extension of the time of payment, 
is such a waiver. 

Insurable Interests. The insured must have an 
interest in the subject matter of the insurance. A 
policy of insurance obtained upon a subject in 
which the insured has no interest is void, whether 
or not it be so stipulated therein. The interest 
need not be the largest which may be had in the 
subject matter, nor need it be an absolute or 
vested interest. Probably it may be safely said 
that if pecuniary loss would be suffered by the 
insured by a loss of the subject matter, his inter- 
est therein is an insurable one. 

One may, for interest, insure his equitable in- 
terest in property, the legal title to which is in an- 
other. So different parties having different in- 
terests in the same subject matter may severally 
procure insurance on their several interests. A 
person has an insurable interest in property real 
or personal, which he has contracted to sell to the 
full value of the property, regardless of the price 
he has contracted to sell for. A lessor has an in-, 
surable interest in property which he has leased. 

The interest of both mortgagor and mortgagee 



104 COMMERCIAL LAW 

in the mortgaged property is insurable. This is 
true of the interest of the mortgagor, though the 
property be mortgaged to its full value. A trus- 
tee holding the legal title to property may insure 
it for the use of the beneficiary. A partner has 
an interest in the partnership property which he 
may insure for his own benefit. 

An agent or consignee, having the principal's 
property in his possession, and having a special 
interest in it to the amount of his commission, may 
insure it in his own name, and in case of loss re- 
cover the full amount of the policy. 

A common carrier may insure goods entrusted 
to him for carriage. 

An interest in the profits of a voyage, whether 
as owner of the vessel and cargo or otherwise, is 
a lawful subject of insurance. 

As the assured in other kinds of insurance must 
have an interest in the subject matter, so in life 
insurance the assured must have an interest in the 
life insured. Any person may insure his own life 
for the benefit of another, even a stranger ; and it 
does not seem to affect the validity of the insur- 
ance that that other pays the premiums ; but if in- 
surance be effected by one person on the life of 
another, the assured must show himself to have 
possessed an interest in the life of that other, at 
any rate at the time the insurance was effected, 
though it does not seem to be necessary to show 
that the interest existed at the time of death, un- 



COMMERCIAL LAW 105 



/■' 



less it be required by the terms of the policy. 
Otherwise the insurance would be a mere wager 
and void. But this interest need not be strictly a 
legal or definite one. Any substantial pecuniary 
interest is sufficient. 

The following have been held to have insurable 
interests : a sister in the life of a brother on whom 
she depends for support ; a parent in the life of a 
child ; a child in the life of a parent ; a husband in 
the life of his wife; an uncle in the life of his 
nephew ; a partner in the life of his copartner ; a 
creditor in the life of his debtor; an employer in 
the life of an employe. 

An assignee of a life policy as well as the origi- 
nal beneficiary, must have an interest in the life 
insured. 

Insurance Agents. The general principles of 
the law of agency are applicable to insurance as 
well as other agents. The provisions of the pol- 
icy respecting the agent's authority are usually 
held to be binding. 

An agent authorized to issue and renew policies, 
and to transact the business of the company in the 
particular locality, is a general agent ; the posses- 
sion of blank policies and renewal receipts is evi- 
dence of this. Notice to a general agent is notice 
to the company. And this comprehends knowl- 
edge acquired of facts after the execution of the 
policy, which, unless waived, would avoid it, as 



106 OMMERCIAL L A W 

well as inaccuracies of statement by the applicant, 
and of the existence of other facts prior to the ex- 
ecution of the policy, the omission to state which 
would otherwise vitiate it. 

Eepresentations of the agent even as to the suf- 
ficiency of the description or statements in the ap- 
plication, and the binding force or scope of the 
policy, unless denied the power to the knowledge 
of the insured, are binding upon the company. 
Likewise the mistakes or omissions of the agent in 
preparing the description, or otherwise, are 
treated as those of the company. 

Unless forbidden by the express terms of the 
policy or otherwise to the knowledge of the in- 
sured, the agent acting within the scope of his em- 
ployment may waive provisions of the policy. 

An insurance agent, in the absence of any other 
knowledge, is presumed to be authorized to re- 
ceive premiums in any usual mode, and to make 
any customary arrangement with regard thereto. 
An agent authorized to receive applications and 
collect premiums, but not authorized to issue poli- 
cies, cannot extend the time of payment of re- 
newal premiums. 

The powers of an agent with respect to con- 
tracts which are made are not so extensive as in 
negotiations prior to their consummation. His 
power to change, modify or waive any of their 
terms is limited. Insurance agents are generally 



COMMERCIAL LAW 107 

authorized to act within a specified territory, but 
a policy on a subject matter beyond such limits is 
binding, unless knowledge of the want of authority 
on the part of the agent is brought home to the in- 
sured. Neglect of an agent in forwarding the 
premium is chargeable to the company. 

Waiver. If the insurers, with full knowledge 
of facts which would avoid the policy, neverthe- 
less execute and deliver it, or if, after its delivery, 
they acquire knowledge of such facts and subse- 
quently treat it as valid and binding, by any acts, 
words or conduct which might reasonably lead the 
insured to suppose himself to be still insured, they 
will have waived the defect, and be estopped to as- 
sert it. The insurers may even be estopped to 
deny their obligation by acts or conduct subse- 
quent to the loss. The fact that the insurers do 
not cancel the policy under a provision therefor, 
when knowledge comes to them of its violation, is 
evidence of an intention to waive such violation. 

Reinsurance. Eeinsurance is where the insurer 
reinsures its risks in another company. The obli- 
gations of the reinsurer to the reinsured are the 
same as those of the insurer to the insured. If 
the policy be void as against the insurer, it will 
also be void as against the reinsurer. The in- 
surer, in obtaining reinsurance, must, like the 
original applicant, make known facts within his 
knowledge mateiial to the risk, and otherwise dis- 



108 COMMERCIAL LAW 

charge the obligations of good faith imposed upon 
him. 

The reinsurer may waive any defences against 
the reinsured. Thus, if objections be not made to 
the proofs furnished, they will be deemed to have 
been waived. 



BAILMENT. 

A bailment is the transfer of the possession of 
personal property from one person to another 
without a transfer of the ownership of it. 

Kinds of Bailment. Bailments are ordinarily 
classified into deposits, mandates, gratuitous 
loans, bailments for hire, and pledges or pawns. 

A deposit is a bailment of goods to be kept with- 
out reward and delivered according to the object 
or purpose of the original trust. 

A mandate is similar to a deposit. Like the de- 
posit, it is a bailment without compensation to 
the bailee. But while the storage of the goods is 
the chief object of a deposit, in the case of a man- 
date the object of the bailment is to give the bailee 
possession in order that he may perform some 
acts upon or in reference to the bailed goods. 

A gratuitous loan (commodatum) is a bailment 
of an article for a certain time, to be used by the 
borrower without paying for the use. To consti- 
tute a bailment a gratuitous loan, its chief object 
must be that the bailee may have the use of the 
bailed article. 

Bailments for hire comprise all those classes of 

109 



110 COMMERCIAL LAW 

bailments where the bailee hires the use of the 
bailed article, and also where the bailor hires the 
bailee to store or carry the bailed article or per- 
form some work or act upon it. 

A pledge or pawn is a bailment of goods by one 
person to another to secure the performance of 
some legal obligation. Delivery is essential to 
the creation of the pledge. When the possession 
of the goods is given up to the pledgor the pledge 
is defeated. A pledgee has an implied power to 
sell the pledged goods after a default by the 
pledgor. A pledgee of commercial paper has im- 
plied power to collect the same at maturity. A 
pledgor has the right to redeem goods pledged for 
a debt at any time before they are sold. 

A pledge is extinguished by payment of the 
debt, or the recovery of a judgment for the debt, 
or by the destruction of the pledged goods. 

A creditor who has a pledge may sue upon the 
debt without relinquishing the pledge or selling it. 
Pledged goods cannot be levied upon in an action 
by a third person against the pledgor. 

By giving a pledge the pledgor impliedly war- 
rants his title to the pledged goods. The pledgee 
may alienate his right to possession of the pledged 
goods. 

Lien. A lien is a right, arising by operation of 
law and not by agreement of the parties, to hold 
possession of goods to secure the payment of a 
debt. One having a lien upon goods has no right 



COMMERCIAL LAW 111 

to sell them after default in the payment of the 
debt. 

Contract. A bailment is often, though not in- 
variably, accompanied by a contract express or 
implied. But in the absence of, and indepen- 
dently of, any contract, the law imposes certain 
duties upon the parties. Thus the duty of taking- 
proper care of the bailed goods devolves upon the 
bailee, even when there is no contract of bailment. 

Degree of Care. The degree of care of the 
bailed goods required of the bailee is fixed by the 
provisions of the contract of bailment, if there are 
any provisions upon the subject. In the absence 
of such provisions, the degree of care imposed by 
law upon the bailee depends upon the circum- 
stances of the case. Where the bailment is solely 
for the benefit of the bailor, the bailee is, in gen- 
eral, held to only a slight degree of diligence in 
the care of the bailed article. 

Where the bailment is for the sole benefit of the 
bailee, he is held to a very high degree of dili- 
gence. When it is for the mutual benefit of both 
parties, he is held to an ordinary degree of dili- 
gence. 

Other circumstances besides the nature of the 
bailment affect the degree of diligence required of 
a bailee. The nature of the article bailed, and 
other facts surrounding the bailment, may also be 
important factors in determining the degree of 
care required of him, 



112 COMMERCIAL LAW 

Duty of Restitution Independent of Contract. 
The duty of the bailee to make restitution of the 
bailed goods is one which the law imposes, and 
does not depend on the existence of any contract. 

Bailee Must Account for Profits. The obliga- 
tion of the bailee to account for and return all in- 
crease and profits of the bailed goods is also one 
that exists independently of any contract. 

Use of Bailed Article. The right of the bailee 
to use the bailed article depends upon the special 
facts of the bailment. 

Restitution: To Whom Made. Where the bail- 
ment is made by several jointly, the bailee is not 
justified in returning the goods to one of them. 
Where the bailor has sold the goods during the 
bailment, the bailee is not obliged to return the 
goods to the vendee. 

Restitution: How Made. The duty of the bailee 
as to the time, manner and place of return is gov- 
erned largely by the special circumstances of each 
particular case. 

Term of Bailment. In the case of mandates, 
deposits and gratuitous loans, the bailee has no 
right to possession as against his bailor. The lat- 
ter may determine the bailment at any time by a 
demand. In the case of a bailment for hire for 
use the bailee is given the right to possession of 
the bailed goods for a specified time. 

Detinue. The common-law remedy peculiarly 
appropriate in a case where the bailee wrongfully 



COMMERCIAL LAW 113 

refused to make a restitution of the bailed goods 
was the action of detinue. 

A Conversion Terminates Bailment. A wrong- 
ful conversion by the bailee of the bailed goods 
determines the bailment instantly, and makes the 
bailee's possession wrongful. Thus, where a 
bailee assumes to pledge or sell the bailed goods 
as his own, such act amounts to a conversion, and 
the bailor may immediately bring replevin or 
trover. But a pledgee or hirer of chattels may 
assign his right of possession to another. Such 
assignment is not a conversion. In some cases an 
unauthorized user of the bailed article may 
amount to a conversion. 

Actions by Bailor Against Bailee. The bailor 
may maintain an action of tort against the bailee 
when the latter has converted the goods. Detinue, 
and in most cases trover, will be in case of a re- 
fusal by the bailee to return the goods after a de- 
mand. 

Negligence: Burden of Proof. Where goods 
are destroyed or injured while in the possession 
of a bailee, it seems that the bailor, in order to re- 
cover against the bailee, must prove that the loss 
or injury was owing to the bailee 's negligence. 

Where the bailee detains the bailed goods or 
puts them to an unauthorized use, he is liable in 
damages for any injury which may happen to 
them after the time when the goods should have 
been returned or during the unauthorized use, 



114 COMMERCIAL LAW 

although such injury may result from inevitable 
casualty. ■ 

Action by Bailor Against Third Person. A 
bailor cannot maintain an action of trover or re- 
plevin against a third person during the existence 
of the bailment. But where the bailment has been 
determined by a sale or pledge of the bailed arti- 
cle by the bailee, the bailor may maintain trover 
against the purchaser or pledgee. A bailor may, 
during the continuance of the bailment, recover 
against a third person, in a special action upon 
the case, for a permanent injury done to the bailed 
goods. 

Bailee Against Third Person. A bailee may 
maintain trover against a third person for a con- 
version of the goods. 

A bailee may maintain a special action upon the 
case against a third person for negligently injur- 
ing the bailed goods, where the bailee is thereby 
made liable to respond in damages to the bailor. 

The measure of damages in an action of trover 
or in a special action on the case by a bailee 
against a third person is the actual value of the 
goods, not the value of the bailee's possessory in- 
terest in them. 

Bailee vs. Bailor. A bailee entitled to the pos- 
session of the bailed goods for a specific time may 
recover in trover against the bailor for a wrong- 
ful retaking of them. 

A bailee cannot, in general, set up title in a 



COMMERCIAL LAW 115 

third person in defence to an action by the bailor 
to recover possession of the bailed goods. But 
where the bailor is not the owner of the goods and 
the owner demands them from the bailee, the 
claim of the true owner, thus asserted, justifies 
the bailee in refusing to return the goods to the 
bailor. 

A delivery by the bailee to his bailor after no- 
tice of the claim of the real owner renders the 
bailee liable to the real owner in trover. 

Where a third person asserts a title in the 
bailed goods adverse to that of the bailor, the 
bailee is justified in refusing to deliver the goods 
to either party until he has had a reasonable time 
to ascertain which of the two is entitled. 

Where a third person claims the goods in the 
bailee's possession, the bailee may interplead 
such claimant with his bailor if his claim is under 
a title derived from that of the bailor, but not 
where he claims under a title adverse to that of 
the bailor. 



COMMON CARRIERS. 

CAEKIEKS OF PASSENGEES. 

If there be a legally enforceable contract be- 
tween the carrier and the passenger, the terms of 
that contract must, if they so far extend, deter- 
mine the liability of the carrier for personal in- 
juries suffered by the passenger. If the contract 
contain no stipulation as to such liability, or if its 
stipulation is of such a character that it is against 
the policy of the law to enforce it, the liability of 
the carrier will be dependent solely on the duty 
raised by the law. 

The general principle on which rests the liabil- 
ity of carriers to passengers is that wherever one 
party enters into relations with another party 
upon the basis of a contract made upon a valuable 
consideration, and those relations bring one of the 
parties into contact with a material agency which 
the contract requires the other party to supply, 
the law then exacts of him who supplies that ma- 
terial agency the duty of exercising care in its 
selection, maintenance in repair, and operation; 
and this duty must be so performed as to protect 
not only the contracting party, but also those 

116 



; COMMERCIAL LAW 117 

agents, servants and assistants whom the nature 
of the relation between the contracting parties 
justifies him in employing. 

Under the general principle last stated, carriers 
are liable to attendants of passengers ; passengers 
of another carrier received for transportation in 
the defendant's cars; passengers of another car- 
rier transported in a means of transportation fur- 
nished by the defendant; passengers of another 
carrier with whom a station is used jointly; con- 
signors and consignees and their agents person- 
ally assisting in the reception or delivery of their 
freight; persons entering under special contract 
upon the defendant's line or premises; post-office 
employees ; express agents. 

A passenger is a person whom a common car- 
rier has contracted to carry from one place to an- 
other, and has, in the course of the performance 
of that contract, received under his care either 
upon the means of conveyance, or at the point of 
departure of that means of conveyance. 

The relation of carrier and passenger is de- 
pendent on the existence of a contract of carriage. 
Carriers are not liable to one who has not been 
accepted as a passenger, and the intention of the 
person to pay his fare is immaterial where there 
has been no contract of the carrier with him. 
Where the person injured is a trespasser the car- 
rier owes him no duty, and is not bound to indem- 



118 COMMERCIAL LAW 

nify him for anything less than injuries wilfully 
inflicted. 

Where the person injured has been permitted 
by the carrier's servants to ride without paying 
fare, the carrier is liable if the servant was ex- 
pressly or impliedly authorized to grant such per- 
mission. But where the carrier's regulations, 
publicly made known, do not authorize the servant 
to accept passengers, the carrier is not liable. 

When the Relation Begins and Ends. The re- 
lation of carrier and passenger begins when, a 
contract of carriage having been made or the pas- 
senger having been accepted as such by the car- 
rier, he has come upon the carrier's premises, or 
has entered upon any means of conveyance pro- 
vided by the carrier. 

Of course, the mere purchase of a ticket does 
not make the purchaser a passenger ; he must also 
come upon the carrier's premises or upon its 
means of conveyance before the relation can be 
said to have begun. The relation of carrier and 
passenger having been constituted continues until 
the journey, expressly or impliedly contracted for, 
has been concluded, and the passenger has left the 
carrier's premises. 

Act of God. The duty of a common carrier to 
his passengers requires him to exercise the high- 
est degree of care for their safety. But carriers 
are not insurers of the safety of their passengers ; 
nor are they to be held liable for injuries to their 



COMMERCIAL LAW 119 

passengers resulting from such defects in their 
buildings or means of transportation as could not 
have been guarded against by the exercise of care 
on their part, nor for injuries caused solely by the 
"act of God" without negligence on the carrier's 
part. 

Third Parties. Carriers are not liable for in- 
juries solely caused by the acts of third parties 
unconnected with the carrier by any relation of 
agency. 

Contributory Negligence. When the person 
injured, or the plaintiff, or any person whose neg- 
ligence is attributable to the plaintiff, has so far 
contributed to the injury by his want of ordinary 
care, that, but for such want of ordinary care on 
his part, the injury would not have been done, the 
carrier is not liable to the plaintiff in damages for 
such injury. 

Although negligence upon the part of the plain- 
tiff may have in fact contributed to his injury, the 
carrier will nevertheless be liable, if its servants 
could by the exercise of ordinary care have 
avoided the injury to the plaintiff. 

Respondeat Superior. The general rule is that 
a carrier, like other masters, is legally responsible 
for an injury done by an act of its servant if the 
particular act be within the scope of and be done 
in the exercise of the servant's delegated author- 
ity. Where the relation of master and servant 
exists, and where the act causing the injury is 



120 C M M ERCIAL LA W 

within the scope of the servant's employment, it 
is not material that the master did not order or 
even know of the doing of the particular act, or 
that in doing the act, or in the manner of its per- 
formance, the servant disobeyed the express in- 
junctions of the master. 

Stations. A carrier is liable for negligence in 
its construction or maintenance in repair of its 
station approaches, station buildings and station 
platforms. 

CAEKIEKS OF GOODS. 

The legal responsibility of one who undertakes 
to carry the goods of another will depend pri- 
marily upon his classification among carriers, and 
this classification will result from such considera- 
tions as the kind of business in which he is en- 
gaged, the character in which he holds himself out 
to the world, the terms of his contract to carry 
and deliver, and generally his legal relations with 
the consignor, the consignee, and third persons. 

A common or public carrier is one who under- 
takes as a business to carry from one place to an- 
other the goods of all persons who may apply for 
such carriage, provided the goods be of the kind 
which he professes to carry and the persons so 
applying will agree to have them carried upon 
the lawful terms prescribed by the carrier. A 
common carrier insures the goods he carries 
against loss or injury from whatever cause aris- 



COMMERCIAL LAW 121 

ing, excepting only acts of God and the public en- 
emy. He is also obliged by law to carry for all 
persons indifferently. The only limitations upon 
this duty are that he need not profess to carry 
every possible description of goods, and he may 
prescribe certain lawful terms or conditions. 
There is no substantial difference, in the princi- 
ples of- law applicable, between carriers by land 
and carriers by water. A feature in modern liti- 
gation involving common carriers, and in one 
sense a point of distinction between them and 
other carriers, arises from the fact that they are 
for the most part corporations. 

Consignment to Carrier. The carrier's first 
duty is to accept and carry the goods consigned. 
He is bound to receive and carry all the goods of- 
fered for transportation, subject to all the respon- 
sibilities incident to his employment, and is liable 
to an action in case of refusal. 

A carrier is bound to provide sufficient facilities 
and means of transportation for all freight which 
it should reasonably expect will be offered. But 
it is not bound to provide in advance for extraor- 
dinary occasions, nor for any unusual influx of 
business which is not reasonably to be expected. 

Where there is a blockade of freight, goods 
should be sent forward in the order of time in 
which they are received by the carrier for trans- 
portation. 

A carrier may require the shipper to state the 



122 COMMERCIAL LAW 

actual value of the articles shipped, aud is only 
liable for such damages as do not exceed the de- 
clared value. The weight of authority holds that 
the consignor is not bound to state the value of the 
goods unless asked ; but if he is asked the value of 
the goods he must give correct and truthful an- 
swers. 

The carrier's liability begins from the moment 
of complete delivery. A delivery at the usual 
place of consignment is constructive notice to the 
carrier of the consignment of the goods, and such 
delivery binds him. The deposit of goods in a 
warehouse as accessory to the carriage and for 
the purpose of being carried, imposes upon the 
carrier the liability of a carrier, and not that of a 
warehouseman. In such case if they are lost by 
fire while awaiting shipment the carrier is liable 
to the same extent as if the goods were in transit, 
unless his liability has been limited or restricted 
with the consent of the shipper or owner of the 
goods. 

Since most of the carrier's business, both as to 
the receipt of goods and the making of contracts 
for their transportation, must be conducted by 
agents, there is necessarily a large delegation of 
authority to them, and it is reasonable that the 
consignor should have the right to presume that 
they have the necessary authority to act for the 
carrier. 

Where something remains undone by the con- 



COMMERCIAL LAW 123 

signor to complete the consignment, or where the 
circumstances show his retention of the control 
over the goods, the carrier's liability is not that 
of a common carrier. Where goods are con- 
signed with instructions to await further orders 
from the consignor before carriage, the carrier in- 
curs, at the utmost, the liability of a warehouse- 
man. 

Where goods are consigned to a consignee he 
must be regarded by the carrier as the prima- 
facie owner unless the carrier has notice that the 
right of the consignee to receive the goods is dis- 
puted. 

The consignor is charged with the duty of 
seeing to it that the goods consigned are properly 
marked, and cannot hold the carrier responsible 
in such case for errors. 

Notices Limiting Liability. In the United 
States it is the generally accepted doctrine that 
the carrier may limit his liability by public notice 
of a reasonable requisition as to manner of con- 
signment and entry of goods, their character, 
their value, and his own charges. It has also been 
held that a notice by the carrier stipulating that 
he shall not be liable for any loss unless the claim 
therefor shall be made in writing at . his office 
within a limited time after the date of the contract 
is reasonable and valid. The weight of authority 
in the various states is clearly to the effect, how- 



124 COMMERCIAL LAW 

ever, that the carrier cannot limit his liability for 
negligence by notice. 

Whether the contract of the common carrier to 
exempt it from liability is just and reasonable, de- 
pends upon its terms. Any stipulation or condi- 
tion, framed without limitation or exception, to 
exempt a company from liability for its own negli- 
gence or misconduct, or that of its servants or 
agents, is unjust and unreasonable. 

A condition is reasonable which exempts a com- 
pany from any liability for extraordinary loss to 
the customer (such as that of market or profit, or 
deterioration from innate infirmity) caused by 
those ordinary detentions to which goods in traf- 
fic are subject; especially if the goods are such as 
the company only profess to carry on special 
trains, and are peculiarly liable to deterioration. 

By the clear weight of authority in the United 
States, the rule has been adopted that the com- 
mon carrier can make no contract the effect of 
which will be to exempt -him from liability for 
negligence. 

The contracts of carriers are governed by the 
law of the place where made. 

Carrier's Liability During Transit. Through- 
out the United States the rule is that the carrier 
may by special contract limit his responsibility as 
insurer. 

Where the carrier makes an express contract 
for delivery within a specified time, he is bound to 



COMMERCIAL LAW 125 

the fulfillment of that contract and is liable for de- 
lay from whatever cause the delay may have 
arisen. There is no rule of law which specifies 
the time within which the delivery must be made 
unless the contract was express. A promise to 
carry and deliver within a reasonable time will, 
however, always be implied. 

In general, a carrier is not liable for the delay 
caused by an act of God, where no negligence in 
the performance of his duties is shown. 

In case of delay in the transportation of goods, 
the proper measure of damages is the difference 
between the market value of the goods when deliv- 
ered and that at the time they should have been 
delivered. 

The carrier is liable for a deviation from his 
usual route where a loss occurs in consequence, 
whether or not such loss be attributable to an act 
of God or not. Consent of the owner to a devia- 
tion will excuse the carrier. 

The carrier is not liable for loss or injury occur- 
ring through defective packing, where such de- 
fects are not apparent. 

Seizure of goods intrusted to a carrier under a 
valid and legal process of law constitutes a good 
and sufficient excuse for non-delivery. 

Stoppage in Transitu. Stoppage in transitu 
is the right of a vendor of goods upon credit, to 
reclaim and take possession of them while they 
are being carried to the vendee, whose bankruptcy 



126 COMMERCIAL LAW 

or insolvency has occurred or become known after 
the sale. The right to stop belongs only to the 
vendor of goods on credit or to one who occupies 
a similar position. But when the vendor has re- 
ceived part payment for the goods he will still 
have the right of stoppage in transitu for the bal- 
ance of purchase-money due. 

The right of stoppage in transitu may be 
waived by the vendor, as, for example, where he 
knows of the vendee's insolvency at the time of 
the sale. 

The carrier is entitled to express notice from 
the consignor before he will be liable for not stop- 
ping goods in transit. Delivery, actual or con- 
structive, of the goods to the vendee or his servant 
will defeat the right of stoppage in transitu. 

The right of stoppage may be defeated by a 
transfer of the bill of lading to a bona fide in- 
dorsee for value. 

Connecting Carriers. Each carrier confining 
itself to its common-law liability is only bound in 
the absence of a special contract to safely carry 
over its own road and safely to deliver to the next 
connecting carrier ; but any one of the companies 
may agree that over the whole road its liability 
shall extend. 

It is well settled that the receiving carrier may 
contract for the entire transportation. The com- 
pany so contracting to deliver goods within a cer- 
tain time at a destination beyond the terminus of 



COMMERCIAL LAW 127 

its own line is liable to the consignor for dam- 
ages caused by delay in transportation over such 
connecting roads. 

It is competent for a carrier to limit his respon- 
sibility by special contract to his own line. In 
such case his full duty is discharged when he de- 
livers the goods in safety to a connecting carrier. 
A railroad company cannot be compelled to give a 
bill of lading for delivery beyond its line. 

The liability of a connecting carrier does not be- 
gin, and the duty of the first carrier is not com- 
pleted, until there has been an actual delivery to 
the connecting carrier, or at least such a notifica- 
tion to him as, according to the course of busi- 
ness, is equivalent to a tender of delivery. 

Where a railroad company is unable to forward 
freight by the next connecting lines owing to an 
obstruction thereof, it is bound to retain the goods 
a-nd notify the owner so that he may reclaim them. 

Carrier's Liability as Warehouseman. Where 
goods are received to be forwarded in the usual 
course of business, the liability of the common car- 
rier immediately attaches. When they are lost 
by accidental fire while in the carrier's ware- 
house, awaiting transportation, he is liable as a 
common carrier unless his common-law liability 
has been limited by an agreement with the ship- 
per. Where goods are left by the consignor with 
the carrier awaiting orders to forward the same, 



128 COMMERCIAL LAW 

the liability of the company is that of a ware- 
houseman and not that of a common carrier. 

The measure of the warehouseman's duty is 
that degree of care which a reasonably prudent 
man takes of his own property of a like descrip- 
tion. He is not an insurer. Although the carrier 
makes no charge for warehouse storage of goods 
held to await future orders whether at the begin- 
ning or end of the transit, he is not to be consid- 
ered a gratuitous bailee but a bailee for hire. 

Where, by the terms of a special contract, or by 
the law of a State, a railroad company receiving 
goods for transportation to a point beyond its 
own line assumes no extra terminal liability, it is, 
nevertheless, not exempted from liability until it 
has actually delivered the goods to the next car- 
rier in the line, and while stored in its warehouse 
or station awaiting transportation by such con- 
necting carrier, the liability is that of a common 
Garrier, and not that of a warehouseman. Where 
at the end of the transit, the carrier retains the 
goods in his own possession according to custom 
or previous usage, and for the consignee's con- 
venience, to hold them until called for, his liability 
is that of a warehouseman only. 

Where a railroad company receives loaded cars 
from another road for transportation it is liable 
as a common carrier in case they are destroyed en 
route by fire. A railroad company acting as 



COMMERCIAL LAW 129 

warehouseman lias a lien upon goods stored by it 
until all the back charges thereon are paid. 

Carrier's Liability Arising Out of Delivery. 
The carrier's duty to deliver according to the 
terms of his expressed or implied contract is as 
essential and binding as is his duty to carry 
safely. 

A delivery to a drayman, cartman, or other per- 
son unauthorized by the consignee to receive 
goods is made at the risk of the carrier. Fraud, 
imposition, or mistake to which the carrier is sub- 
jected will not excuse a mis-delivery. A waiver 
by the consignee of the rights or privileges he en- 
joys as to delivery may occur, and will release the 
carrier. 

C. 0. D. Goods. Where the carrier accepts a 
consignment of goods with the undertaking to col- 
lect on delivery, he is the agent of the consignor 
for such purpose, and is bound to an exact compli- 
ance with his undertaking. 

Goods to be Held Till Called For. A carrier 
accepting goods with an understanding that 
they are to be left till called for is bound to hold 
them a reasonable time for the consignee to de- 
mand and receive delivery, and thereupon his lia- 
bility ascommon carrier ceases. 

Measure, of Damages. When a common carrier 
fails to transport goods to the point of destina- 
tion, the damages usually recovered are the value 
of the goods at that point with interest from the 



130 COMMERCIAL LAW 

time they should have been delivered less the 
amount of freight. 

Where the goods are unreasonably delayed the 
measure of damages is the difference between the 
market value of the goods at the time they should 
have arrived and their actual value when they did 
arrive, with interest from the former date less the 
freight. 

Where the carrier refuses to deliver the goods, 
except upon an unreasonable condition, this is 
equivalent to conversion and the measure of dam- 
ages will be the value of the goods at the time of 
the conversion. 

Where the carrier delivers at the wrong desti- 
nation, the measure of damages is the difference 
between the value of the goods where they are de- 
livered and the value at the point where they 
should have been delivered. 

The mere fact that the goods are injured by de- 
lay does not render the carrier liable for their full 
value if they are still applicable to the intended 
use. Where goods are delayed and further ex- 
pense is necessarily incurred to put them in sala- 
ble condition, the carrier must also bear this ex- 
pense. 



PEOPERTY 



EEAL PKOPERTY. 



Definition. Real Things. — Are such as can be 
comprehended under the terms lands, tenements, 
and hereditaments ; an accurate definition is : 
such things as are held in frank tenement or de- 
scend to the heir. 

Land is the surface of the earth, whatever is at- 
tached to it by nature or by the hand of man, and 
all that is contained within it or below it. 

Hereditaments are all things which may de- 
scend to the heir at the death of the owner. Her- 
editaments are commonly divided into corporeal 
and incorporeal hereditaments. Corporeal her- 
editaments include land and such estates in land 
as are conveyed by livery of seisin. 

Tenements properly means all things that can 
be held in tenure at the common law. It is a 
larger term than lands including lands and the 
rights issuing out of or concerning land. 

Conditions may be annexed to estates in such a 
way as to create or enlarge them. A condition 
may be annexed to an estate bounded by appro- 
priate words of limitation (such as "in fee," "for 

131 



132 COMMERCIAL LAW 

life," or "for years"), with the result that, on its 
breach, the estate is liable to be defeated. 

PERSONAL PROPERTY. 

Definition. Personal property embraces all ob- 
jects and rights which are capable of ownership, 
except freehold estates in land, and incorporeal 
hereditaments issuing thereout, or exercisable 
within the same. The words are co-extensive with 
"chattels," which are divided into: (1) chattels 
real or interests which are annexed to or concern 
real estate, and, (2) chattels personal, which in- 
clude every species of property lacking the two 
characteristics of real estate, viz., immobility as to 
place, and indeterminate duration as to time. The 
latter are again subdivided into: (a) Corporeal 
things or choses in possession, which include all 
things which, being themselves capable of motion 
or of being moved, may be perceived by the senses 
— seen, touched, taken possession of — in short, live 
stock or dead, manufactured goods or raw ma- 
terial, everything capable of touch and not fixed 
to the soil, (b) Incorporeal, choses in action. 
Things incorporeal a man has not the occupation 
of but merely a bare right to occupy the thing in 
question, the possession whereof may, however, 
be recovered by a suit or action in law; whence 
the thing so recoverable is called a thing or chose 
in action. 

Kinds of Personal Property. There are cer- 



COMMERCIAL LAW 135 

tain kinds of personal property which are more 
closely allied than others to real property and are 
subject to some of the rules governing the latter. 
These are: (1) Heir-looms, which are such per- 
sonal chattels as descend to the heir along with 
the inheritance; (2) title deeds, keys, etc., also 
go to the one who is entitled to the land; (3) grow- 
ing crops which, upon the death of the person who 
planted them, pass to his executor and not to his 
heir, and are ordinarily treated as personalty; 
(4) emblements which are the right of a tenant 
to the profit of his crop after termination of his 
estate; (5) fixtures are those personal chattels 
which a temporary occupier has annexed to the 
land and which he or his representatives may aft- 
erwards sever and remove against the will of the 
owner or successor to the freehold; (6) among 
other special kinds of personal property, tame an- 
imals may be held by an absolute property, and 
animals ferae naturae by a qualified right; (8) 
money is a species of personal property of un- 
usual significance. 

Of special kinds of incorporeal chattels may be 
mentioned: (1) Negotiable paper; (2) insurance 
policies and annuities; (3) patents, copyrights, 
and trade marks; (4) seats in exchanges; (%) 
debts and demands, including the law of guaranty 
and suretyship; (6) shares of stock; (7) good- 
will, names, etc. 



134 COMMERCIAL LAW 

Personal property, like real, may belong either 
to one or several owners. 

MOETGAGES. 

Definition. A mortgage, in the most compre- 
hensive sense of the term, is a conveyance of prop- 
erty for the purpose of secnring the payment of 
money. With rare exceptions mortgages are 
given for the purpose of securing the payment of 
a debt ; but when for the performance of some act 
other than the payment of a debt, inasmuch as 
the property is bound for the damages subse- 
quent upon the non-performance of the act, such 
being the ultimate purpose in the execution of the 
instrument, it is thus for the purpose of securing 
the payment of money. 

Before foreclosure is completed the interest of 
the mortgagee is personal assets, which upon his 
death passes to his executor or administrator. A 
deed or other instrument executed by his heir or 
devisee purporting to convey his interest, will 
pass no title whatever. 

Essentials of a Mortgage. The essentials of a 
mortgage are : Parties capable of making and ac- 
cepting a mortgage; a transfer and pledge of 
property either in esse or to be after acquired, 
and which is identified or susceptible of identifica- 
tion ; a consideration, which may be either the se- 
curing of the payment of a debt ascertained or 
ascertainable; or, in case the thing to be done is 



COMMERCIAL LAW 135 

something other than the payment of money, the 
obligation to do that thing indicated with such 
definiteness as to insure performance; the execu- 
tion and delivery of the mortgage, or of the in- 
strument upon which it is based when the mort- 
gage rests in parol. 

Mortgageable Property. Almost any interest 
in real or personal property which is susceptible 
of being transferred, may be mortgaged ; but it is 
essential to the existence of the mortgage that the 
property shall be designated upon the face of the 
instrument by such description, either general or 
special, or by such reference to other writings as 
will insure the identification of particular prop- 
erty. 

A mortgage may be made upon the improve- 
ments on land distinct from the land upon which 
they are situate when such intention is clearly 
shown. 

When Mortgages are Invalid. A mortgage may 
be invalid for the want or failure of considera- 
tion ; or illegality of consideration ; or because ex- 
ecuted on Sunday; or obtained by duress; or 
tainted with usury. 

Mortgages are invalid when not signed by the 
mortgagor; or when left in blank as to the in- 
debtedness ; or blank as to the name of the mort- 
gagee; or when the mortgage has been procured^ 
through fraud; or is made in fraud of creditors. 

Construction and Effect of Mortgages. In the 



136 COMMERCIAL LAW 

construction of equivocal or ambiguous terms in 
a mortgage the well-settled principle is applied 
that it should be construed most strongly against 
the mortgagor, and so as to give to the mortgagee 
an effective security. 

Insurance of Mortgaged Property. The mort- 
gagor and mortgagee have each a separate insur- 
able interest in the mortgaged premises. The 
mortgagee's insurance is not upon the debt, but 
upon his interest or estate in the property by rea- 
son of the mortgage. 

Mortgagor's Relation to the Mortgage. The 
mortgagor, his vendee, or whoever may otherwise 
have acquired his estate or interest, is the owner 
of the mortgaged premises to all interests, and for 
all purposes, as respects every one except the 
mortgagee and those claiming under him. He 
may retain possession and is entitled to all the 
remedies of owner as respects any injury to the 
property. He may lease, sell, devise, or other- 
wise dispose of the premises. 

The mortgagor's equity of redemption is sub- 
ject to sale under execution, and also to attach- 
ment for his debts. 

Mortgagee's Relation to the Mortgage. While 
under the strict doctrine of the common law, the 
mortgagee may by virtue of the legal estate with 
which he is invested, enter upon the possession 
even before condition broken, or recover against 
the mortgagor in ejectment or trespass, yet this 



COMMERCIAL LAW 137 

right and the remedies for its enforcement are 
only recognized for the purpose, and to the end of 
enabling him to protect and make available the se- 
curity for his debt. 

The possession of the mortgagee, when ob- 
tained, whether before or after default, cannot be 
divested by the mortgagor, except upon payment 
of the debt secured; and even upon payment the 
mortgagor cannot recover the possession by eject- 
ment; his remedy is in equity for a release or a 
reconveyance. 

A mortgagee in possession must account fox the 
rents and profits. Repairs made by the mort- 
gagee must be allowed him in an accounting. 

Equity of Redemption. The equity of redemp- 
tion the right to have the property relieved from 
the condition in which it has been placed by fail- 
ure of literal performance, and to have it restored 
to its original status through the ultimate pay- 
ment of the debt, is fundamental to the very con- 
ception of a mortgage, whatever the form in 
which it exists ; and such right cannot be waived. 
Any party in interest may redeem. The right of 
redemption is barred at the expiration of the 
same length of time as will bar foreclosure. 

Conveyance of Mortgaged Land. Where a 
clause in a deed states that the conveyance is 
made subject to the payment of a mortgage speci- 
fied, such clause does not alone render the grantee 
liable for the mortgaged debt. To create such 



138 COMMERCIAL LAW 

personal liability the words used must clearly im- 
port that the obligation was intended by the one 
party and knowingly assumed by the other. A 
purchaser who has assumed to pay a mortgage 
debt on the land cannot dispute the validity of the 
mortgage. 

Assignment of Mortgages. A formal assign- 
ment of a mortgage at law is properly made by 
deed, which may be a separate instrument or an 
indorsement upon the mortgage itself. 

Tender and Payment. As a general rule, pay- 
ment of the mortgage debt extinguishes the mort- 
gage; but whether or not it shall have this effect 
in the given case depends upon the condition of 
things existing at the time of payment, the rela- 
tion of the parties, and their intention as to 
keeping the mortgage alive. 

Payment of the debt at or before the day of 
payment designated in the mortgage, discharges 
the mortgage, and operates to revest the estate 
without any release or reconveyance. 

Release and Discharge. No formal mode of 
release is prescribed by the law; whatever will 
operate to reinvest the mortgagor, or his grantee, 
with the title of the mortgagee will release the 
mortgage. 

LANDLORD AND TENANT. 

Definition. The relation of landlord and ten- 
ant is founded upon contract whereby the tenant, 



COMMERCIAL LAW 139 

for a consideration, is to have the use and occu- 
pation of lands or tenements for life, for years, 
or at will. The consideration from the tenant 
to the landlord is usually the payment of a sum 
of money, at specified times during the term. 
Like other contractual relations, that of landlord 
and tenant may be express or implied. As a 
general rule anything corporeal or incorporeal 
may be the subject of a demise. 

Kinds of Tenancy. A tenant at sufferance is 
one who comes into possession of land by lawful 
title but holds over by wrong after the determi- 
nation of his interest. He has only a naked pos- 
session and has no estate which he can assign 
or transfer. Under such a tenancy the landlord 
can terminate the relation at his pleasure. 

A tenancy at will is where one person lets 
land to another to hold at the will of the lessor. 
A person who takes possession of premises under 
an agreement to lease or purchase but refuses to 
carry out the agreement is to be regarded as a 
tenant at will. 

Where one person holds lands or tenements 
under a demise from another and no certain 
term has been mentioned, but an annual rent has 
been reserved, it constitutes a tenancy from year 
to year. It is a general letting without limita- 
tion as to time. 

A tenancy for life may be created by act of 
the parties or by operation of law. When it is 



140 COMMERCIAL LAW 

by act of the parties it is done through the 
instrumentality of a deed, lease or devise. 

Rights and Liabilities of Landlord. A land- 
lord who owns the reversion in fee may main- 
tain an action against his tenants before the term 
expires for an injury to the freehold. 

"Where the owner of the reversion grants the 
whole or a part of the premises the lessee is 
bound to pay the whole or a part of the rent to 
the grantee, and such grantee has all the reme- 
dies to enforce payment which the lessor had. 

The lessor may assign the lease and vest the 
power in the assignee to collect the rent without 
a transfer of the reversion. 

Rights, duties and Liabilities of Tenant. After 
the relation of landlord and tenant has been 
consummated, and the tenant is in possession of 
the devised premises, he has the sole and exclu- 
sive right to use and occupy them during his 
term, subject only to the limitations in his lease. 

It is a general and well settled rule that a 
tenant cannot dispute his landlord's title. The 
tenant is liable to his landlord for an injury to 
the buildings on the premises caused by his 
negligence or that of his servants. 

The lease containing no stipulation to the con- 
trary, the lessee may sublet the premises to 
another for such purposes as are not inconsistent 
with the terms of the lease. If the sub-tenant is 
accepted by the landlord as his immediate tenant, 



COMMERCIAL LAW 141 

the tenant is discharged from the payment of 
subsequently accruing rent. 

When there is no restraining clause in the lease 
against assignment, the lessee may assign with- 
out the assent of the lessor, or even against his 
protest. 

Repairs. The duty to repair where the land- 
lord has not expressly agreed to do so, or in states 
where the duty is not regulated by statute, rests 
upon the tenant. 

Where the landlord is required by the lease to 
make repairs during the term, he is entitled to 
notice from the tenant before he is in default. 

The landlord has a right to re-enter demised 
premises for the purposes of making such repairs 
as are indispensable to the preservation of the 
reversion, such as putting on a new roof. 

Bent. Bent may be denned as being a certain 
profit issuing yearly out of lands and tenements. 

Where rent is payable in money, and no time 
is fixed for the payment, it is payable at the end 
of the year if it is a yearly tenancy. Where it is 
payable quarterly the rent is not due until the 
end of the quarter. 

Acts of the landlord which will relieve the 
tenant from the payment of rent are such as 
show an intention on the part of the former that 
the latter shall no longer hold possession of the 
demised premises. Such acts of the landlord 



142 COMMERCIAL LAW 

must be of a grave and permanent character, 
and not mere trespasses. 

Termination of Tenancy. "Where a tenancy is 
for a certain period of time, subject to be de- 
feated by the happening of a particular event, 
the happening of such event will terminate the 
tenancy. If the lease is for a definite term of 
years without any contingency the expiration of 
such term of years will terminate the tenancy. 

The commonest method of terminating the ten- 
ancy is by notice to quit given in the manner 
usually provided by statute, and for default in 
the payment of rent or some other covenant of 
the lease. 

Destruction by casualty of the building occu- 
pied by a tenant terminates the tenancy. 

Eviction. An eviction is a turning out of pos- 
session or placing the party in such a situation 
that his expulsion being inevitable, he voluntarily 
surrenders possession to save expulsion. 

Surrender. A surrender is the yielding up of 
an estate for life or years to him who has an 
immediate estate in reversion or remainder. 

Forfeiture. A forfeiture may result from a 
non-payment of rent in accordance with the 
terms of the lease when there is a covenant to 
that effect. A forfeiture may also be declared 
where the tenant repudiates the lease and its 
conditions, or from an unlawful use of the prem- 
ises. The right of forfeiture is waived by the 



COMMERCIAL LAW 143 

landlord by acts on his part showing an intention 
to abandon the right. 

Holding Over Term. Where a tenant holds 
over after the expiration of his term, it may be 
regarded as a tenancy at sufferance, or a tenancy 
at will, or he may be treated as a trespasser. 

Landlord's Possessory Remedies. The land- 
lord may maintain ejectment against his tenant 
and recover possession of the demised premises 
where the tenant repudiates the tenancy or holds 
over without right. 

By reason of the action of ejectment not fur- 
nishing a rapid and complete method of obtain- 
ing possession of demised premises wrongfully 
withheld by the tenant, in many states statutes 
authorizing a more effective remedy in an action 
of forcible entry and detainer have been enacted. 
In this action there can be no inquiry as to title. 
The only questions usually in issue are the plain- 
tiff's right to immediate possession and the 
defendant's forcibly obtaining or holding such 
possession. 



INSOLVENCY AND BANKRUPTCY. 

Definition. As used in the bankruptcy acts, 
' 'bankrupt' ' means a person who has done or 
suffered to be done some act which is by law 
declared to be an act of bankruptcy. 

Insolvency generally means the condition of a 
petson who is unable to pay his debts as they 
become due in the ordinary course of business. 

Bankruptcy Laiv. The constitution of the 
United States gives Congress power to establish 
uniform laws on the subject of bankruptcy. The 
individual states may enact valid bankruptcy 
laws so far as they do not conflict with the 
Federal Act. 

The Federal bankruptcy law of 1898 confers 
jurisdiction in bankruptcy on district courts of 
the United States in the several states, the 
supreme court of the District of Columbia, the 
district courts of the several territories, and the 
United States courts in the Indian Territory and 
the district of Alaska. 

Who May Apply for Adjudication. The laws 
of the United States authorize proceedings to be 
instituted by a debtor as well as by creditors. 

144 



COMMERCIAL LAW 145 

The right of a debtor to file a petition to be 
adjudged a bankrupt is not affected by the fact 
that involuntary proceedings have already been 
instituted against. 

Under the present law, involuntary proceed- 
ings are started by the filing of a petition by three 
or more creditors who have provable claims 
amounting in the aggregate to five hundred 
dollars or more. 

Inventory and Schedule. One of the require- 
ments of the bankruptcy laws is that the debtor 
shall make and present to the court an inventory 
of his assets, if he has any, and a schedule of his 
debts. 

The inventory or schedule of the debtor's prop- 
erty must show the amount and kind thereof, its 
location, and its money value in detail. The 
debtor is also required to give a list of his 
creditors, the amounts due each, and matters 
respecting the nature and extent of the liabilities. 

Hearing and Determination. An adjudication 
may be opposed on the ground that there was 
fraud or collusion between the debtor and the 
petitioning creditor, or that creditors to the requi- 
site number and amount did not join in the peti- 
tion, or any matter that will act as an estoppel 
against the petitioner. The law provides for the 
examination of the debtor with regard to his 
affairs and his property. 

Who May Be Adjudged Bankrupts or Insolv- 



146 COMMERCIAL LAW 

ents. Under the United States statute any natu- 
ral person, except a wage-earner or a person 
engaged chiefly in farming, any unincorporated 
company, and any corporation engaged princi- 
pally in manufacturing, trading, printing, pub- 
lishing, or mercantile pursuits, owing debts to 
the amount of one thousand dollars or over, may 
be adjudged an involuntary bankrupt. 

Acts of Bankruptcy or Insolvency. The bank- 
rupt and insolvency laws, probably without ex- 
ception, make it an act of bankruptcy for a debtor 
to convey or transfer his property, or any part 
thereof, with the intent of hindering, delaying, 
or defrauding his creditors, by putting the prop- 
erty so conveyed beyond the reach of process 
against him. 

It is an act of bankruptcy for a debtor who is 
insolvent, or in contemplation of insolvency, to 
give any creditor a preference over others. 

An assignment for the benefit of creditors is 
generally declared an act of bankruptcy or 
insolvency, even though without preferences. 
Some of the statutes make it an act of bank- 
ruptcy for a debtor to remove or conceal his prop- 
erty, or any part of it, with intent to defraud or 
delay creditors. 

Debts and Claims Against Estate. Claims are 
to be proved before the court or some officer as 
may be provided by the statute. The proof of 
claims consists in a statement under oath, in 



COMMERCIAL LAW 147 

writing, signed by the creditor, setting forth the 
claim ; the consideration therefor ; what securities, 
if any, are held therefor; and what payments, if 
any, have been made thereon. 

The statutes generally authorize any party in 
interest to make objection to any claim, and leave 
it to the trustee or assignee to allow or reject the 
claim, with the right on the part of the objector 
to have the matter finally determined by the court. 

The general rule is that any debt which is 
recoverable either at law or in equity is provable. 

Assignee or Trustee. The statutes generally 
provide that a person or persons to administer 
the estate of the debtor, and variously designated 
by the statutes as assignees, trustees, or syndics 
shall be chosen by the creditors at a creditors' 
meeting. The meeting is called by order of the 
court. In the event of the failure of an election 
by the creditors, the judge, or some other officer 
of the bankruptcy court, may make the appoint- 
ment. The assignee or trustee, before entering 
on his duties, must give a bond with sureties. 

The general rule is that all property and rights 
of property of every name and nature, whether 
real, personal or mixed, belonging to a debtor at 
the time he is adjudged a bankrupt or insolvent, 
pass to the trustee or assignee to be administered 
for the benefit of creditors. 

Trustees or assignees are required like other 
fiduciaries to render periodical statements of the 



148 COMMERCIAL LAW 

estates in their hands and also to render final 
accounts when the estates are closed. 

Compositions. Bankruptcy and insolvency 
laws usually provide that the debtor may make a 
composition with his creditors on such terms as 
they may mutually agree on, thereby arresting 
the bankruptcy or insolvency proceedings and 
enabling the debtor to obtain his discharge on 
paying the sums agreed on. A composition 
accepted by the creditors and approved by the 
court operates as a discharge of the debtor from 
all debts which are provable in bankruptcy 
against him, but it does not affect any debt or 
liability not so dischargeable, unless the particular 
creditor assents to the composition. 

Discharge of the Debtor. The right of a debtor 
to a discharge, when it exists at all, exists only 
by virtue of the statute creating it ; and to deter- 
mine whether, in any case, a debtor has such a 
right, reference must be had to the statute gov- 
erning the matter. 

One of the chief requisites to the right of a 
debtor to be discharged from his debts under the 
bankruptcy or insolvency laws is the surrender 
to his creditors of all his property which is liable 
for the payment of his debts. 

The discharge of a debtor granted in a bank- 
ruptcy or insolvency proceeding operates to 
relieve the debtor entirely of liability for all debts 
which are provable against him, though proof was 



COMMERCIAL LAW 149 

not actually made. The effect of a discharge, 
however, is not to extinguish the debt or liability, 
but merely to take away the creditor's right of 
action. 

The right to oppose the granting of a discharge 
in bankruptcy or insolvency is given to any per- 
son interested in the matter, that is, generally 
speaking, creditors who have provable claims. 
The present Federal bankruptcy law gives only 
two grounds for refusing a discharge, viz. : that 
the bankrupt has committed an offense punish- 
able by imprisonment under the statute, or that 
he has destroyed, concealed, or failed to keep 
books of account. 



COLLATEEAL NOTES. 

Notes may contain collateral agreements with- 
ont in any way affecting their negotiability. 
These collateral agreements, of which the follow- 
ing is an example, are usually attached to the note 
as a part of the same sheet of paper : 

KNOW ALL MEN BY THESE PEE SEN TS, That the sub- 
scriber, .hereto justly indebted to John Rich- 
ardson, or order, upon the within promissory note, and has this 
day deposited with said John Bichardson, as security to the pay- 
ment thereof, the following mentioned collaterals, namely: Two 
diamond rings, one gold watch and a gold headed cane. 

And in default of payment of said note, or any part thereof 
at maturity, I do hereby authorize said John Bichardson or his 
assigns, to sell and dispose of said security, or any part thereof, 
at public or private sale, in his or their discretion; and in the 
event of said security, or any part thereof, depreciating in mar- 
Jcet value, I do hereby authorise said John Bichardson or his as- 
signs, at his or their option, to sell and dispose of said security, 
or any part thereof, at any time before or after the maturity of 
said note, at either public or private sale. And in the event cf 
sale before or after the maturity of said note aforesaid, no 
notice of such sale shall be required to be given to the under- 
signed, or to any other person or persons whomsoever, either by 
advertisement or otherwise. And the proceeds of such sale or 
sales so made as aforesaid, shall, after the payment of all ex- 
penses and commissions attending said sale or sales, be applied 
on said note, and the balance, if any, after payment of said note 

150 



COMMERCIAL LAW 151 

with interest, shall be returned to the undersigned, his heirs, 
executors, administrators or assigns. And at any sale of ' said 
collaterals, or any part thereof, made by virtue hereof, it shall be 
optional with the legal owner or holder of said promissory note, 
to bid for and purchase said collaterals or any part thereof. 

Witness my hand and seal at Chicago in the State of Illinois 
this 30th day of August, A. D. 1907. 

John Doe. [Seal.] 

They may, but need not be, under seal. Stocks, 
bonds, other notes, and in fact any kind of per- 
sonal property can be used as collateral. 

JUDGMENT NOTES. 

Notes may have what is called a " judgment 
clause" attached and still retain all the features 
of a plain promissory note. 

Following is a common form of judgment note : 

$100.00 Chicago, August 26th, 1902. 

One year after date, fcr value received, I promise to pay to 
the order of John Bichardson, One Hundred ($100) n %oo Dol- 
lars, at his Chicago office, with interest after date at the rate of 
6 per cent, per annum, and with interest at the rate of seven 
per cent, per annum, after maturity, until paid. 

And to secure the payment of said amount I hereby authorize 
irrevocably, any attorney of any court of record to appear for 
me in such Court, in term time or vacation, at any time hereafter, 
to waive a jury trial in writing and confess a judgment, without 
process, in favor of the holder of this note, for such amount as 
may appear to be unpaid thereon, together with costs and five 
per centum attorney's fees, and to waive and release all errors 
which may intervene on any such proceedings, and consent to 
immediate execution upon such judgment; hereby ratifying and 
confirming all that my 'said attorney may do by virtue hereof. 
No. 4 John Doe. 
Due Dec. 26, 1907. 



152 COMMERCIAL LAW 

Agents are frequently appointed by what is 
commonly called "power of attorney.' ' The fol- 
lowing is a form: 

POWER OF ATTORNEY. 

KNOW ALL MEN BY THESE PRESENTS, That Horace 
Wood, of the City of Chicago, County of Cook, in the State of 
Illinois, has made, constituted and appointed, and BY THESE 
PRESENTS does make, constitute and appoint John Johnson, 
of the City of St. Louis, County of St. Louis and State cf Mis- 
souri, true and lawful attorney for him, and in his name, .place.; 
and stead to 

(Here insert the acts or act to be done by the agent or at- 
torney.) 



giving and granting unto John Johnson, said Attorney, full 
power and authority to do and perform all and every act and 
thing whatsoever, requisite and necessary to be done in and 
about the premises, as fully, to all intents and purposes, as 
he might or could do if personally present at the doing thereof, 
with full power of substitution and revocation, hereby ratifying 
and confirming all that his said Attorney or his substitute shall 
Lwfully do or cause to be done by virtue hereof. 

IN TESTIMONY WHEREOF, I have hereunto set my hand. . 
and seal, .this 10th day of September, 1907. 
Signed, Sealed and Delivered in Presence of 

J Horace Wood. 
\ [Seal.] 

•] 



COMMERCIAL LAW 153 



STATE OF 
County of 



in and for, and residing in the said County, in the 
State aforesaid, Do Hereby Certify, that 

personally known to me 

to be the same person whose name subscribed 

to the foregoing Instrument, appeared before me this 
day in person, and acknowledged that he signed, sealed 

and delivered the said Instrument as free and 

voluntary act, for the uses and purposes therein set 
forth. 

GIVEN under my hand and seal, this 

day of A. D. 190 



Where the power of attorney authorizes the 
agent to sell real estate or to make long-term 
leases, it should be acknowledged, as by the form 
attached, and recorded in the office of the recorder 
of deeds in the county where the land is located. 

The following are forms of deeds : 

WAKKANTY DEED LONG FOKM. 

(Spaces for names and description of property in blank.) 

THIS INDENTURE, Made this day 

of in the year of our Lord One Thousand 

Nine Hundred and BETWEEN 

of the in the County of 

and State of party of 

the first part, and 

of the in the 

County of and State of 

party of the second part. 



154 COMMERCIAL LAW 

WITNESSETH, That the said party of the first part, for 

and in consideration of the sum of 

Dollars, in hand paid by the said 

party of the second part, the receipt whereof is hereby acknowl- 
edged, and the said party of the second part forever released 
and discharged therefrom, ha ... . granted, bargained, sold, re- 
mised, released, conveyed, aliened and confirmed, and by these 
presents do ... . g*rant, bargain, sell, remise, release, convey, alien 

and confirm unto the said party of the second part, 

heirs and assigns forever, all the following 

described lot piece or parcel of land, situated 

in the County of and State of 

and known and described as follows, to-wit 



TOGETHER WITH ALL AND SINGULAR the heredita- 
ments and appurtenances thereunto belonging, or in any wise 
appertaining, and the reversion and reversions, remainder and 
remainders, rents, issues, and profits thereof; and all the estate, 
right, title, interest, claim, or demand whatsoever, of the said 
party of the first part, either in law or equity, of, in, and to the 
above bargained premises, with the hereditaments and appurte- 
nances: TO HAVE AND TO HOLD the said premises above 
bargained and described, with the appurtenances, unto the said 

party of the second part 

heirs and assigns, forever. 

AND the said 

party of the first part, for and heirs, execu- 
tors and administrators, do covenant, grant, bargain and 

agree, to and with the said party of the second part,. 

heirs and assigns, that at the time of the ensealing and delivery 



COMMERCIAL LAW 155 

of these presents, well seized 

of the premises above conveyed, as of good, sure, perfect, abso- 
lute, and indefeasible estate of inheritance in law and in fee 
simple, and ha ... . good right, full power, and lawful authority 
to grant, bargain, sell and convey the same in manner and form 
aforesaid, and that the same are free and clear from all former 
and other grants, bargains, sales, liens, taxes, assessments and 
encumbrances, of what kind and nature soever; and the above 
bargained premises, in the quiet and peaceable possession of 

the said party of the second part heirs and 

assigns, against all and every other person or persons lawfully 
claiming or to claim the whole or any part thereof, the said 
party of the first part shall and will Warrant and Forever 
Defend 



AND the said party of the first part hereby expressly waive 

, release .... and relinquish .... unto the said party of the 

second part,. .heirs, executors, administrators 

and assigns, all right, title, claim, benefit, privilege, advantage 
and exemption, in and to the above described premises, and each 
and every part thereof, which is given by or results from any and 

all laws of the State of 

pertaining to the exemption of homesteads. 

IN WITNESS WHEBEOF, The said party of the first 

part hereunto set hand and seal . 

the day and year first above written. 

Signed, Sealed and Delivered in the Presence of 



[SEAL.] 
[SEAL.] 
[SEAL.] 
[SEAL.] 



156 COMMERCIAL LAW 

WARRANTY DEED SHORT STATUTORY FORM. 

(Blank spaces for names and description.) 
THIS INDENTURE WITNESSETH, That the Grantor... 



of the in the County of 

and State of for and in consideration of the 

sum of Dollars, in hand paid, 

CONVEY. . . .and WARRANT. ...to 



of the County of and State 

of the following described Beal Estate, to-wit: 



situated in the of in the 

County of in the State of hereby. . 

releasing and waiving all rights under and by virtue of the Home- 
stead Exemption Laws of this State. 



DATED, This day of A. D. 190. . 

[SEAL.] 

[SEAL.] 

[SEAL.] 

[SEAL.] 

QUIT CLAIM DEED SHORT STATUTORY FORM. 

THIS INDENTURE WITNESSETH, That the Grantor, 



of the in the County of 

and State of for the consideration of 

Dollars, 

CONVEY, .and QUIT CLAIM, .to 



COMMERCIAL LAW 157 



of the County of and State 

of all interest in the following described BeaH 

Estate, to-wit: 



situated in the County of in the State af 

hereby releasing and waiving all rights under and by 

virtue of the Homestead Exemption Laws of this State. 

DATED This day of A. D. 190.. 

[SEAL.] 

[SEAL.] 

[SEAL.] 

[SEAL.] 

The following form of acknowledgment may be 
used for any of the foregoing deeds: 

State of ) 

V ss. 

County of ) I, 

in and for said County, in the 

State aforesaid, Do Hereby Certify, That 



personally known to me to be the same person, .whose 
name subscribed to the foregoing in- 
strument, appeared before me this day in person, and 
acknowledged that. . . .he. . . .signed, sealed and delivered 

the said Instrument as free and voluntary 

act, for the uses and purposes therein set forth, including 
the release and waiver of the right of homestead. 

Given Under my hand and seal, this 

day of A. D. 190 



158 COMMERCIAL LAW 

A notary public is usually the most conveuieut 
officer for taking acknowledgments. 

The following is a form of lease between land- 
lord and tenant : 

LEASE — SHORT FORM. 

THIS IXDEXTUBE, Made this.. day of 

1.... 

BETWEEN as lessor, and 

as lessee. 

WITNESSETH, as follows: That the said lessor hath this day 
leased to the said lessee the premises) known as 



situated in the City of in the State of 

Io^ a, to be occupied as a 

only by said lessee, for and during the term commencing on the 
day of , A. D. 1 .... , and end- 
ing the day of A. D. 1 .... , upon the 

terms and conditions hereinafter set forth, and said lessee hereby 
accepts said lease upon said conditions, and covenants to per- 
form the same as follows: 

1st. The said lessee shall pay to the said lessor, at 

in said city of 

as rent for said demised premises for said term, the sum of 

DOLLAES, payable as follows : 

the sum of DOLLAES upon the 

delivery hereof, for rent to the day of 

1 , and the further sum of 

DOLLAES, upon the first day of 

each and every month thereafter during the continuance of the 
term hereby created, the same being monthly rent at the rate of 

DOLLAES per month, 

payable monthly in advance. 

2nd. Said lessee agrees to surrender the possession of said 
premises to said lessor upon the termination of the term above 
created or the forfeiture of this lease, as hereinafter provided; 






COMMERCIAL LAW 159 

and further agrees, during the occupancy of said demised prem- 
ises to maintain and keep the same in as good condition and re- 
pair as the same shall be upon taking possession thereof, natural 
wear, injury by fire, or other inevitable accidents excepted— ^ 
damage by fire or other calamity, rendering said premises un- 
tenantable, shall terminate this lease — there shall be no abate- 
ment of said stipulated rent, or any part thereof, so long as said 
lessee shall retain possession of said demised premises, or any 
part thereof. 

3rd. Said lessee agrees to pay the water tax upon said 

premises . 

as the same becomes due and payable, and will take reasonable 
and necessary precaution against freezing of the water pipes, and 
that no hair, thread, string or rags, or rubbish of any description, 
or fruit parings or banana skins be allowed to enter the drainage 
or waste pipes of said premises, and will pay all damage or ex- 
pense occasioned by such neglect ; will clean the catch basin and 
furnaces as occasion may require, and allow no deposit of ashes 
or other rubbish in or upon said premises, or upon any private 
alley adjacent thereto; no cooking stove or any other cooking 
apparatus shall be placed in any other room except the kitchen 
and laundry. Said lessor shall have reasonable opportunity to 
inspect said premises, and do any repairing or other work thereon 
which he shall deem necessary for the preservation of the property. 

4th. To allow the party of the first part free access to the 
premises hereby leased for the purpose of examining or exhibit- 
ing the same, or making any needful repairs or alterations of said 
premises which said first party may see fit to make; also to 
allow to have placed upon said premises, at all times, notice of 
' ' For Sale ' ' and ' ' To Eent, ' ' and will not interfere with the same. 

5th. Said lessee shall not assign this lease, or any portion 
thereof, nor sub-let said premises, or any part thereof, without 
the written consent of the lessor endorsed thereon. In case 
said demised premises shall be vacated during said term, said 
lessor may take immediate possession thereof for the remainder 
of the term, and in his discretion re-let the same, and apply 
the proceeds upon this lease, the lessee to remain liable for the 
unpaid balance of the rent. 

6th. The neglect or failure of said lessee to keep the fore- 



160 COMMERCIAL LAW 

going conditions or covenants, or any or either of them, shall 
constitute a forfeiture of all rights under this lease, and the fur- 
ther occupancy of said demised premises after such forfeiture 
by said lessee shall be deemed, held and taken as a forcible de- 
tainer thereof by said lessee, and said lessor may, without notice, 
re-enter and take possession thereof, and -with or without force 
and with or without legal process evict and dispossess said 
lessee from said above demised premises. 

7th. The party of the second part hereby irrevocably con- 
stitutes and appoints 

or any attorney of any Court of Eecord for 

and in name on default in any of the cove- 
nants herein to enter appearance in any Court 

of Eecord, waive process and service thereof, and confess judg- 
ment against in favor of the said party of the 

first part, from time to time, for any rent which may be then due 

by the terms of this lease, with costs and. 

Dollars as attorney's fees, and to waive and release all errors 
and all rights of appeal from any such judgment or judgments. 

8th. The foregoing covenants shall be obligatory upon 
the heirs, executors, administrators and assigns of the parties 
hereto 



IN WITNESS WHEEEOE, The said parties have hereunto 
set their hands and seals, this day and year first above written. 

'. [SEAL.] 

[SEAL.] 

Where a lease contains a confession of judg- 
ment clause, as in the above form, judgment may 
be taken by confession for rent due, as on a judg- 
ment note. 

Notes which are secnred by trust deeds fre- 
quently contain recitals that they' are so secured, 
though this is not essential. Following are forms 
of trust deed notes and trust deed: 



COMMERCIAL LAW 161 

PRINCIPAL TRUST DEED NOTE. 

190... 

after date, for 

VALUE RECEIVED, Promise to pay to the 

Order of 

the sum of DOLLARS, 

at with interest thereon 

at the rate of per cent, per annum, payable 

annually. 

This Note is secured by a Trust Deed to 

Trustee, of even date herewith, on real estate in 

and is to bear interest at the rate of .per cent, per annum 

after maturity. 



INTEREST COUPON NOTE. 

190. 



DUE TO ORDER OF 

DOLLARS, 

on the day of A. D. 190. ., without 

grace, at... 

with interest at the rate of per cent per annum, after 

maturity, being for an installment of interest due on that day upon 

principal Promissory Note, of even 

date herewith, payable to the order of 

years after its date, for the sum of 

. DOLLAES, secured by 

Trust Deed upon Eeal Estate in. . . . . 



TRUST DEED — SHORT FORM. 
THIS INDENTURE WITNESSETH, That the Grantor.., 

of the in the County of 

and State of , for and in consideration of 



162 COMMERCIAL LAW 

the sum of Dollars, 

in hand paid, CONVEY, .and WARRANT, .to 

. . . of the County 

of .and State of 

the following described Real Estate, to-wit: 



situated in the County of , in the State of Iowa, 

hereby releasing and waiving all rights under and by virtue of 
the Homestead Exemption Laws of the State of Iowa, and 
all right to retain possession of said premises after any default 
in payment or a breach of any of the covenants or agreements 
herein contained, in trust, nevertheless, for the following pur- 
poses : 

WHEEEAS, The said Grantor.., 

herein justly indebted upon Promissory 

Note .... ,bearing even date herewith, payable to the ©refer of 



(Here describe the Notes, both principal and coupon or 
interest notes.) 

NOW, if default be made in the payment of the said 

Promissory Note , or of any part thereof, or the interest 

thereon, or any part thereof, at the time and in the manner 
above specified for the payment thereof, or in case of waste, or 
non-payment of taxes or assessments on said premises, or of a 
breach of any of the covenants or agreements herein contained, 
then in such case the whole of said principal sum and interest, 

secured by the said Promissory Note . . . . , shall 

thereupon, at the option of the legal holder or holders thereof, 
become immediately due and payable; and, on the application 

of the legal holder of said Promissory Note , or either of 

them, it shall be lawful for the said grantee, or his successor in 
trust, to enter into and upon and take possession of the premises 
hereby granted, or any part thereof, and to collect and receive 
all rents, issues and profits thereof; and, in his own name or 
otherwise, to file a bill or bills in any court having jurisdiction 



COMMERCIAL LAW 163 

thereof against the said party of the first part, heirs, 

executors, administrators and assigns, to obtain a decree for 
the sale and conveyance of the whole or any part of said prem- 
ises for the purposes herein specified, by said party of the second 
part, as such trustee or as special commissioner, or otherwise, 
under order of court, and out of the proceeds of any such sale 
to first pay the costs of such suit, all costs of advertising, sale 
and conveyance, including the reasonable fees and commissions 
of said party of the second part, or person who may be appointed 

to execute this trust, and Dollars 

attorney 's and solicitor 's fees* and also all other expenses of this 
trust, including all moneys advanced for insurance, taxes and 
other liens or assessments, with interest thereon at seven per 
cent, per annum, then to pay the principal of said note . . . . , 
whether due and payable by the terms thereof or the option of 
the legal holder thereof, and interest due on said note.... up to 
the time of such sale, rendering the overplus, if any, unto the 

said party of the first part, legal representatives 

or assigns, on reasonable request, and to pay any rent that may 
be collected after such sale and before the time of redemption 
expires, to the purchaser or purchasers of said premises at such 
sale or sales, and it shall not be the duty of the purchaser to see 
to the application of the purchase money. 

AND The said grantor^ .covenant, .and agree .. that .. he . . 
will keep all buildings that may at any time be upon said prem- 
ises insured in such companies as the holder of said notes shall 
direct, for their full insurable value, and make the loss, if any, 
payable to, and deposit the policies of insurance with, the party 
of the second part, as further security for the indebtedness 
aforesaid. 

WHEN The said note . . and all expenses accruing under this 
Trust Deed shall be fully paid, the said grantee or his successor 
or legal representatives shall re-convey all of said premises re- 
maining unsold to the said grantor, .or heirs 

or assigns, upon receiving his reasonable charges therefor. In 

case of the death, resignation, removal from said 

County, or other inability to act of said grantee 

then of 

said is hereby appointed and made succes- 



164 COMMERCIAL LAW 

sor in trust herein, with like power and authority as is hereby 
vested in said grantee. It is agreed that said grantor .. shall 
pay all costs and attorney's fees incurred pr paid by said grantee 
or the holder or holders of said note.. in any suit in which 
either of them may be plaintiff or defendant, by reason of being 
a party to this Trust Deed, or a holder of said note.., and that 
the same shall be a lien on said premises, and may be included 
in any decree ordering the sale of said premises and taken out 
of the proceeds of any sale thereof. 

"WITNESS, The hand.. and seal.. of the said grantor.., 
this day of A. D. 190.., 

[SEAL.] 

[SEAL.] 

The note is a negotiable instrument exactly 
the same as any other note, and in a few of the 
states mortgages and trust deeds are also nego- 
tiable. 

Milwaukee, Wis., Aug. 12, 1907. 

one year after date, for 

VALUE RECEIVED J Promise to pay to the 

Order of Myself 

the sum of One Hundred ($100) Dollars, 

at Milwaukee, .with Interest thereon 

at the rate of 6 per cent, per annum, payable semi-annually. 

This Note is secured by a Trust Deed to Henry Simpson, 
Trustee, of even date herewith, on- real estate in Milwaukee 
County, Wis., and is to bear interest at the rate of 6 per cent, per 
annum after maturity. 



Endorsement : ' ' John Doe. ' ' 

It is customary for the mortgagor to retain 
possession of the property and collect the rents. 
This possession may be taken from him, however, 
by the appointment of a receiver where he has 
made default in the payment of interest or has 



COMMERCIAL LAW 165 

allowed the property to deteriorate and go to 
waste. 

Following are forms of chattel mortgage note 
and chattel mortgage: 

CHATTEL MORTGAGE NOTE. 

$ 190 

after date for 

VALUE RECEIVED, Promise to pay to the 

Order of the 

sum of Dollars, 

at with interest thereon 

at the rate of per cent, per annum, payable annually. 

This Note is secured by a Chattel Mortgage to 

of even date herewith, on personal property in , and 

is to bear interest at the rate of per cent, per annum 

after 

No 

CHATTEL MORTGAGE — SHORT FORM. 

KNOW ALL MEN BY THESE PRESENTS, That I, 

of the town of , in 

the County of , and State of 

in consideration of DOLLARS 

to paid by 

of the County of and State of 

the receipt whereof is hereby acknowledged, do hereby 

grant, bargain and sell unto the said 

and to heirs and assigns 

forever, the following goods and chattels, to-wit: 



To HAVE and to HOLD, All and singular the goods and 

chattels unto the said Mortgagee herein, and heirs and 

assigns, to their sole use and behoof forever. And the Mort- 



166 COMMERCIAL LAW 

gagor. . . . herein, for and for heirs, executors 

and administrators, do hereby covenant to and with the 

said Mortgagee and heirs and assigns, 

that said Mortgagor lawfully possessed 

of the said goods and chattels, as of own property ; 

that the same are free from all incumbrances, and that 

will warrant and defend the same to. the 

said Mortgagee and heirs and assigns, 

against the lawful claims and demands of all persons. 

PROVIDED, NEVERTHELESS, That if the said Mort- 
gagor .... shall 

(Here describe the notes.) 



then this Mortgage shall be void; otherwise to remain in full 
force and effect. 

AND PROVIDED FURTHER, That until default be made 
by the said Mortgagor. . . .in the performance of the condition 
aforesaid, it shall and may be lawful for to retain the pos- 
session of the said goods and chattels, and to use and enjoy the 
same; but if the same, or any part thereof, shall be attached or 
claimed by any other person or persons, at any time before 
payment, or the said Mortgagor, or any person or persons what- 
ever, upon any pretense, shall attempt to carry off, conceal, 
make way with, sell, or in any manner dispose of the same, or 
any part thereof, without the authority and permission of the 
said Mortgagee. ... or heirs, executors, ad- 
ministrators or assigns, in writing expressed, then it shall be 

and may be lawful for the said Mortgagee with or without 

assistance, or agent or attorney, or heirs, ex- 
ecutors, administrators, to take possession of said goods and 
chattels, by entering upon any premises wherever the same 
may be, whether in this County or State, or elsewhere, to and 

for the use of said Mortgagee heirs and assigns. 

And if the moneys hereby secured, or the matters to be done or 
performed, as above specified, are not duly paid, done or per- 
formed at the time and according to the conditions above set 
forth, then the said Mortgagee or attorney or 



COMMERCIAL LAW 167 

agent, or heirs, executors, administrators or assigns, 

may, by virtue hereof declare the whole of said debt due, and 
with or without any suit or process immediately enter and take 
possession of said goods and chattels, and sell and dispose of the 
same at public or private sale, and after satisfying the amount 
due and all expenses, the surplus if any remain, shall be paid 

over to the said Mortgagor or heirs or assigns. 

The exhibition of this Mortgage shall be sufficient proof that 

any person claiming to act for the Mortgagee is duly made, 

constituted and appointed agent and attorney to do whatever is 
above authorized. 

IN WITNESS WHEREOF, The said Mortgagor ha 

hereunto set hand. . . .and seal. . . .this. day 

of in the year of our Lord one thousand 

nine hundred 

Signed, sealed and delivered in presence of 

[SEAL.] 

[SEAL.] 



The statutes of some states require that notes 
secured by chattel mortgage shall recite on their 
face that they are so secured. 

Chattel mortgages must be acknowledged be-, 
fore a justice of the peace in the town or district 
where the mortgagor resides and must be re- 
corded with the county recorder of deeds. As 
between the original parties they are good with- 
out recording. In order that the third parties 
may have notice, such recording is necessary. 
The period of time which may be covered by 
chattel mortgages is regulated by the statutes of 
the different states. 



168 



COMMERCIAL LAW 



STATES AND 



TERRITORIES 



GRACE 
ALLOWED 



Sight 
Paper 



Time 
Paper 



INTEREST 



Legal 
Rate 



Contr't 
Rate 



H fa 



LIMITATION 



Ace' 



Notes 
Years 



Alabama Yes 

Arizona Yes 

Arkansas Yes 

California No 

Colorado Yes 

Connecticut No 

Delaware I No 

Dist. of Columbia. . [ No 

Florida No 

Georgia No 

Idaho No 

Illinois No 

Indiana Yes 

Indian Territory. . . Yes 

Iowa Yes 

Kansas No 

Kentucky Yes 

Louisiana No 

Maine Yes 

Maryland No 

Massachusetts .... Yes 

Michigan Yes 

Minnesota Yes 

Mississippi Yes 

Missouri No 

Montana No 

Nebraska Yes 

Nevada No 

New Hampshire ... Yes 

New Jersey No 

New Mexico Yes 

New York No 

North Carolina Yes 

North Dakota No 

Ohio No 

Oklahoma | Yes 

Oregon I No 

Pennsylvania | No 

Khode Island | Yes 

South Carolina 1 Yes 

South Dakota I Yes 



Yes 

Yes 

Yes 

No 

Yes 

No 

No 

No 

Yes 

Yes 

No 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

No 

No 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

No 

Yes 

No 

Yes 

No 

No 

Yes 

No 

No 

Yes 

Yes 

Yes 



8 


8 


100. 


7 


b 


300.C 


6 


10 


300.C 


7 


b 


299.99 


8 


b 


300. 


6 


b 


100. 


6 


6 


200.C 


6 


10 


300.C 


8 


10 


100. 


7 


8 


100.C 


10 


18 


300. 


5 


7 


200. 


6 


8 


200.d 


6 


10 




6 


8 


lOO.e 


6 


10 


300. 


6 


6 


100.C 


5 


8 


100.C 


6 1 


b 


20. 


6 


6 


100. 


6 


b 


1000. 


6 


8 


300. 


7 


10 


100. 


6 


10 


200.C 


6 


8 


f 


10 


b 


300. 


7 


10 


200. 


7 


b 


300.C 


6 


6 


13.13 


6 


6 


200. 


6 


12 


100.C 


6 


6 


200.g 


6 


6 


200.C 


7 


12 


200. 


6 


8 


300. 


7 


b 


100. 


8 


10 


250. 


6 


6 


300.C 


6 


b 


300. 


7 




10. 


7 


12 


100. 



6j 

5 

5 

2k 

6 

61 

6 

3 

5 

6 

5 
10 
10 

5 
10 

5 
15 

5 

6m 

3 

6 

6 

6 

6 
10 

8 

5 

6 

6 

6 

6 

6 

3 

6 
15 

5 

6 

6 

6 

6 

6 



COMMERCIAL LAW 



169 



STATES AND 


GRACE 
ALLOWED 


INTEREST 


O 

^ Oh" 

Q ^ 
w 


LIMITATION 


TERRITORIES 


Paper 

Sight 

a 


Time 
Paper 


Legal 
Rate 


Contr't 
Rate 


Acc'ts 
Years 


Notes 
Years 


Tennessee 

Texas 


No | Yes 
Yes 1 Yes 
No No 1 
No No 
No No 1 


6 

6 

8 

6 

6 I 

7 

6 

6 

8 


6 
10 

b ] 
6 

6 i 
12 

1 6 

10 

1 12 


h&i 

200.C 

299.99 

200. 

lOO.c.o 

100. 

200.C 

200.d 

20O.c 


6 
2 
4 
6 
3 
3 
5 
6 
8 


6 

4 


Utah 


6 


Vermont 


6 


Virginia 


5 


Washington . 

We3t Virginia ..... 

Wisconsin 

Wyoming 


Yes 
Yes 
No 
Yes 


Yes | 
1 Yes 

No | 
| Yes 


6 

10 

6 

5 



Drafts and Checks on Banks 

excepted. 

No limit. 

And interest. 

By confession, $300. 

By consent of parties, $300. 

In cities and connties of 

300,000, $500; in cities and 

counties of 50,000 to 300,- 

000, $300; elsewhere, $250. 

By confession, $500. 

If note, $1,000. 

If open account, $500. 



j Ten years, if under seal, 
k Four years, if executed in 

State. 
1 If non-negotiable, 17 years. 
m If notes are witnessed, 20 

years, 
n On any bill of exchange, 

note or draft payable on 

demand, grace not allowed. 
o On retail store accounts, 2 

years; on accounts between 

merchant and merchant, 5 

years. 



22 1308 






/ 



